UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811- 07584
Rydex Series Funds
(Exact name of registrant as specified in charter)
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Amy J. Lee
Rydex Series Funds
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Name and address of agent for service)
Registrant's telephone number, including area code:1-301-296-5100
Date of fiscal year end:March 31
Date of reporting period:April 1, 2019 - March 31, 2020
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
3.31.2020
Rydex Funds Annual Report
Sector Funds |
Banking Fund | | |
Basic Materials Fund | | |
Biotechnology Fund | | |
Consumer Products Fund | | |
Electronics Fund | | |
Energy Fund | | |
Energy Services Fund | | |
Financial Services Fund | | |
Health Care Fund | | |
Internet Fund | | |
Leisure Fund | | |
Precious Metals Fund | | |
Real Estate Fund | | |
Retailing Fund | | |
Technology Fund | | |
Telecommunications Fund | | |
Transportation Fund | | |
Utilities Fund | | |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports may no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from a fund electronically by calling 800.820.0888, going to GuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a fund directly, you can inform the Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RSECF-ANN-2-0320x0321 |
| | |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 3 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 5 |
BANKING FUND | 10 |
BASIC MATERIALS FUND | 18 |
BIOTECHNOLOGY FUND | 26 |
CONSUMER PRODUCTS FUND | 34 |
ELECTRONICS FUND | 42 |
ENERGY FUND | 51 |
ENERGY SERVICES FUND | 59 |
FINANCIAL SERVICES FUND | 67 |
HEALTH CARE FUND | 77 |
INTERNET FUND | 85 |
LEISURE FUND | 93 |
PRECIOUS METALS FUND | 102 |
REAL ESTATE FUND | 110 |
RETAILING FUND | 119 |
TECHNOLOGY FUND | 127 |
TELECOMMUNICATIONS FUND | 136 |
TRANSPORTATION FUND | 144 |
UTILITIES FUND | 152 |
NOTES TO FINANCIAL STATEMENTS | 160 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 174 |
OTHER INFORMATION | 175 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 177 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 182 |
| | THE RYDEX FUNDS ANNUAL REPORT | 1 |
Dear Shareholder:
The fiscal year ended March 31, 2020, concluded on a somber note. Even though markets performed well for most of the period, the emergence of a novel and highly contagious form of coronavirus in the last weeks of the period adversely impacted global commercial activity and contributed to significant volatility in certain markets, unseen since the great recession of 2008.
As it spread beyond Asia to virtually every country in the world, many governments and businesses instituted quarantines and closures, which has resulted in significant disruption in manufacturing, supply chains, consumer demand and economic activity. The U.S. Federal Reserve responded quickly to provide liquidity in order to ensure that the U.S. markets continued to function efficiently. The fiscal policy included a spending bill worth over $2 trillion to assist consumers, states, small businesses and certain industries. While these actions helped stabilize the market, volatile conditions continued into April.
As discussed in this annual shareholder report, these events have affected performance of many of our funds (the “Fund” or “Funds”). We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
Security Investors, LLC (the “Investment Adviser”), the Investment Adviser for the Funds, is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm. An affiliate of Guggenheim and the Investment Adviser, Guggenheim Funds Distributors, LLC, is the distributor of the Funds.
Together, we are committed to the safety and prosperity of our clients, our employees, and our shareholders. The resources of the firm are being made fully available not only to support our clients, but also to support our employees and their families.
Please practice the appropriate prudence for the protection not only of your health and that of your friends and loved ones but also for our neighbors and communities. Thank you for the trust you place in us.
Sincerely,
Security Investors, LLC
April 30, 2020
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Sector funds may not be suitable for all investors. Investing in sector funds is more volatile than investing in broadly diversified funds, as there is a greater risk due to the concentration of the fund’s holdings in issuers within the same sector or industry. Certain of the sector funds are considered non-diversified and can invest a greater portion of their assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund.
2 | THE RYDEX FUNDS ANNUAL REPORT | |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2020 |
The 12-month period ended March 31, 2020, was a wild ride for markets. While the U.S. economy was generally in good shape in 2019, recessionary fears rose throughout the year, prompting the U.S. Federal Reserve (the “Fed”) to announce a rate cut on July 31, the first since 2008, amid growing downside risks to policymakers’ baseline growth and inflation forecasts. Key among those risks were slowing global growth, the threat of additional U.S.-China tariffs, and the possible ramifications surrounding Brexit. The Fed subsequently cut rates twice more in 2019, which caused markets to rally toward the end of the year and into early 2020. Stocks reached new highs and credit spreads tightened to historic levels. Since then, the global outbreak of the coronavirus, COVID-19, has been at the center of everything. As of this writing, COVID-19 has spread to 210 countries, resulted in over 2.5 million cases, and caused over 170,000 deaths. Thus far, the U.S. makes up more than 30% of global cases, and 25% of global deaths. States have required the labor force to work from home if possible, individuals to practice social distancing, and non-essential businesses to shut down.
Closures, quarantines, and social distancing efforts have impacted the travel, hospitality, restaurants, and retail industries, with activity down 100% in some areas of the country. Further exacerbating the decline in output will be reduced business investment, which was already stalling due to falling profits, trade conflicts, and political uncertainty. The coronavirus shock and collapse in oil prices will likely further depress capital expenditures.
In response to the crisis, the Federal Open Market Committee cut rates by a further 125 basis points in the first quarter of 2020 and passed a series of stimulus programs. Among these were the Primary and Secondary Market Corporate Credit Facilities, which are lending programs primarily targeting investment-grade corporate bond issuers, implemented in concert with the U.S. Treasury. It was only after the announcement of this program that corporate credit found some relief from the selloff, but we expect this relief may be temporary.
With an alphabet soup of monetary programs targeting relief from the coronavirus impact, fiscal policy has also stepped up to the plate with a spending bill worth over $2 trillion that aims to assist consumers, states, small businesses, and certain industries. There is no question that these programs will help ease the economic fallout from virus containment measures, but even $2 trillion may be too small given the magnitude of the economic shock that we are facing. Additionally, it is far from clear that fiscal measures are an adequate solution to the issue at hand: the physical impediment to consumer spending. Fiscal and monetary policy can do their part, but ultimately it is public health policy that will likely be the greatest determinant of the economic outlook.
For the 12 months ended March 31, 2020, the Standard & Poor’s 500® (“S&P 500”) Index* returned -6.98%. The decline, while significant, represents something of a recovery in stocks. The S&P 500 peaked at 3,386.15 on February 19, 2020, before plummeting 33.9% to a low of 2,237.40 on March 23, 2020, then recovering some lost ground by the end of the month.
The consensus estimate for S&P 500 earnings per share in 2020 is still around $150. Our research shows S&P 500 earnings per share could fall below $100. Similarly, economists have no way to calibrate how bad the economic data could be based on history. The March U.S. non-farm payrolls report was evidence of this, as it showed a decline in payrolls of 700,000 jobs versus survey expectations of a decline of only 100,000 jobs. We currently expect that second quarter U.S. real gross domestic product (“GDP”) quarter-over-quarter growth could fall by 40% annualized and the unemployment rate could rise to at least 20%. Beyond that, the severity of the crisis depends on containment of the virus and the effectiveness of social distancing measures put in place, but expectations for a quick and sustained V-shaped recovery appear overly optimistic.
For the 12 months ended March 31, 2020, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.92%. The return of the MSCI Emerging Markets Index* was -17.36%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted an 8.93% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -6.94%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.25% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
| | THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2020 |
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
MSCI U.S. REIT Index is a free float market capitalization weighted index that is comprised of equity real estate investment trust (“REIT”) securities that belong to the MSCI U.S. Investable Market 2500 Index. The MSCI U.S. REIT Index includes only REIT securities that are of reasonable size in terms of full and free float-adjusted market capitalization to ensure that the performance of the equity REIT universe can be captured and replicated in actual institutional and retail portfolios of different sizes.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P 500® Consumer Discretionary Index is a sub-index of the S&P 500® . The Consumer Discretionary Index includes companies in the following industries: automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing.
S&P 500® Consumer Staples Index is a sub-index of the S&P 500® . The Consumer Staples Index comprises companies whose businesses are less sensitive to economic cycles. It includes manufacturers and distributors of food, beverages and tobacco and producers of non-durable household goods and personal products. It also includes food & drug retailing companies as well as hypermarkets and consumer super centers.
S&P 500® Energy Index is a sub-index of the S&P 500® . The Energy Index comprises companies whose businesses are dominated by either of the following activities: the construction or provision of oil rigs, drilling equipment and other energy-related equipment and services, including seismic data collection; companies engaged in the exploration, production, marketing, refining and/or transportation of oil and gas products, coal and other consumable fuels.
S&P 500® Financials Index is a sub-index of the S&P 500® . The Financials Index contains companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, and financial investment, and real estate, including REITs.
S&P 500® Health Care Index is a sub-index of the S&P 500® . The Health Care Index encompasses two main industry groups. The first includes companies which manufacture health care equipment and supplies or provide health care related services, including distributors of health care products, providers of basic health-care services, and owners and operators of health care facilities and organizations. The first group also includes companies operating in the health care technology industry. The second group includes companies primarily involved in the research, development, production and marketing of pharmaceuticals, biotechnology and life sciences products.
S&P 500® Industrials Index is a sub-index of the S&P 500® . The Industrials Index includes companies whose businesses are dominated by one of the following activities: the manufacture and distribution of capital goods, including aerospace & defense, construction, engineering & building products, electrical equipment and industrial machinery; the provision of commercial services and supplies, including printing, environmental, office and security services; the provision of professional services, including employment and research & consulting services; or the provision of transportation services, including airlines, couriers, marine, road & rail and transportation infrastructure.
S&P 500® Information Technology Index is a sub-index of the S&P 500® . The Information Technology Index covers the following general areas: technology software & services, including companies that primarily develop software in various fields such as the internet, applications, systems, databases management and/or home entertainment, and companies that provide information technology consulting and services, as well as data processing and outsourced services; secondly, technology hardware & equipment, including manufacturers and distributors of communications equipment, computers & peripherals, electronic equipment and related instruments; and thirdly, semiconductors & semiconductor equipment manufacturers.
S&P 500® Materials Index is a sub-index of the S&P 500® . The Materials Index encompasses a wide range of commodity-related manufacturing industries. Included in this sector are companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products, and metals, minerals and mining companies, including producers of steel.
S&P 500® Telecommunications Services Index is a sub-index of the S&P 500® . The Telecommunications Services Index contains companies that provide communications services primarily through a fixed-line, cellular, wireless, high bandwidth and/or fiber optic cable network.
S&P 500® Utilities Index is a sub-index of the S&P 500® . The Utilities Index encompasses those companies considered electric, gas or water utilities, or companies that operate as independent producers and/or distributors of power.
4 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) | |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning September 30, 2019 and ending March 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 1. Based on actual Fund return3 | | | | | |
Banking Fund | | | | | |
Investor Class | 1.48% | (33.77%) | $ 1,000.00 | $ 662.30 | $ 6.15 |
A-Class | 1.74% | (33.85%) | 1,000.00 | 661.50 | 7.23 |
C-Class | 2.48% | (34.09%) | 1,000.00 | 659.10 | 10.29 |
H-Class | 1.74% | (33.84%) | 1,000.00 | 661.60 | 7.23 |
Basic Materials Fund | | | | | |
Investor Class | 1.49% | (24.51%) | 1,000.00 | 754.90 | 6.54 |
A-Class | 1.74% | (24.61%) | 1,000.00 | 753.90 | 7.63 |
C-Class | 2.48% | (24.87%) | 1,000.00 | 751.30 | 10.86 |
H-Class | 1.73% | (24.59%) | 1,000.00 | 754.10 | 7.59 |
Biotechnology Fund | | | | | |
Investor Class | 1.49% | 2.18% | 1,000.00 | 1,021.80 | 7.53 |
A-Class | 1.73% | 2.04% | 1,000.00 | 1,020.40 | 8.74 |
C-Class | 2.48% | 1.67% | 1,000.00 | 1,016.70 | 12.50 |
H-Class | 1.73% | 2.05% | 1,000.00 | 1,020.50 | 8.74 |
Consumer Products Fund | | | | | |
Investor Class | 1.48% | (14.05%) | 1,000.00 | 859.50 | 6.88 |
A-Class | 1.73% | (14.17%) | 1,000.00 | 858.30 | 8.04 |
C-Class | 2.48% | (14.49%) | 1,000.00 | 855.10 | 11.50 |
H-Class | 1.73% | (14.17%) | 1,000.00 | 858.30 | 8.04 |
Electronics Fund | | | | | |
Investor Class | 1.49% | (2.91%) | 1,000.00 | 970.90 | 7.34 |
A-Class | 1.74% | (3.03%) | 1,000.00 | 969.70 | 8.57 |
C-Class | 2.48% | (3.39%) | 1,000.00 | 966.10 | 12.19 |
H-Class | 1.74% | (3.03%) | 1,000.00 | 969.70 | 8.57 |
Energy Fund | | | | | |
Investor Class | 1.49% | (52.54%) | 1,000.00 | 474.60 | 5.49 |
A-Class | 1.74% | (52.57%) | 1,000.00 | 474.30 | 6.41 |
C-Class | 2.48% | (52.76%) | 1,000.00 | 472.40 | 9.13 |
H-Class | 1.73% | (52.58%) | 1,000.00 | 474.20 | 6.38 |
Energy Services Fund | | | | | |
Investor Class | 1.49% | (62.61%) | 1,000.00 | 373.90 | 5.12 |
A-Class | 1.74% | (62.65%) | 1,000.00 | 373.50 | 5.97 |
C-Class | 2.49% | (62.78%) | 1,000.00 | 372.20 | 8.54 |
H-Class | 1.73% | (62.63%) | 1,000.00 | 373.70 | 5.94 |
Financial Services Fund | | | | | |
Investor Class | 1.49% | (26.04%) | 1,000.00 | 739.60 | 6.48 |
A-Class | 1.73% | (26.14%) | 1,000.00 | 738.60 | 7.52 |
C-Class | 2.48% | (26.41%) | 1,000.00 | 735.90 | 10.76 |
H-Class | 1.74% | (26.14%) | 1,000.00 | 738.60 | 7.56 |
Health Care Fund | | | | | |
Investor Class | 1.48% | (1.82%) | 1,000.00 | 981.80 | 7.33 |
A-Class | 1.74% | (1.94%) | 1,000.00 | 980.60 | 8.62 |
C-Class | 2.48% | (2.27%) | 1,000.00 | 977.30 | 12.26 |
H-Class | 1.72% | (1.94%) | 1,000.00 | 980.60 | 8.52 |
6 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Internet Fund | | | | | |
Investor Class | 1.48% | (5.01%) | $ 1,000.00 | $ 949.90 | $ 7.21 |
A-Class | 1.74% | (5.13%) | 1,000.00 | 948.70 | 8.48 |
C-Class | 2.48% | (5.48%) | 1,000.00 | 945.20 | 12.06 |
H-Class | 1.72% | (5.13%) | 1,000.00 | 948.70 | 8.38 |
Leisure Fund | | | | | |
Investor Class | 1.49% | (24.32%) | 1,000.00 | 756.80 | 6.54 |
A-Class | 1.74% | (24.42%) | 1,000.00 | 755.80 | 7.64 |
C-Class | 2.48% | (24.70%) | 1,000.00 | 753.00 | 10.87 |
H-Class | 1.73% | (24.41%) | 1,000.00 | 755.90 | 7.59 |
Precious Metals Fund | | | | | |
Investor Class | 1.39% | (10.96%) | 1,000.00 | 890.40 | 6.57 |
A-Class | 1.63% | (11.08%) | 1,000.00 | 889.20 | 7.70 |
C-Class | 2.38% | (11.43%) | 1,000.00 | 885.70 | 11.22 |
H-Class | 1.63% | (11.10%) | 1,000.00 | 889.00 | 7.70 |
Real Estate Fund | | | | | |
A-Class | 1.72% | (28.66%) | 1,000.00 | 713.40 | 7.37 |
C-Class | 2.47% | (28.94%) | 1,000.00 | 710.60 | 10.56 |
H-Class | 1.74% | (28.66%) | 1,000.00 | 713.40 | 7.45 |
Retailing Fund | | | | | |
Investor Class | 1.48% | (15.90%) | 1,000.00 | 841.00 | 6.81 |
A-Class | 1.73% | (15.99%) | 1,000.00 | 840.10 | 7.96 |
C-Class | 2.48% | (16.30%) | 1,000.00 | 837.00 | 11.39 |
H-Class | 1.73% | (15.98%) | 1,000.00 | 840.20 | 7.96 |
Technology Fund | | | | | |
Investor Class | 1.48% | (5.17%) | 1,000.00 | 948.30 | 7.21 |
A-Class | 1.73% | (5.29%) | 1,000.00 | 947.10 | 8.42 |
C-Class | 2.48% | (5.64%) | 1,000.00 | 943.60 | 12.05 |
H-Class | 1.73% | (5.29%) | 1,000.00 | 947.10 | 8.42 |
Telecommunications Fund | | | | | |
Investor Class | 1.49% | (10.95%) | 1,000.00 | 890.50 | 7.04 |
A-Class | 1.74% | (11.06%) | 1,000.00 | 889.40 | 8.22 |
C-Class | 2.49% | (11.40%) | 1,000.00 | 886.00 | 11.74 |
H-Class | 1.75% | (11.08%) | 1,000.00 | 889.20 | 8.27 |
Transportation Fund | | | | | |
Investor Class | 1.49% | (23.73%) | 1,000.00 | 762.70 | 6.57 |
A-Class | 1.74% | (23.82%) | 1,000.00 | 761.80 | 7.66 |
C-Class | 2.48% | (24.11%) | 1,000.00 | 758.90 | 10.91 |
H-Class | 1.73% | (23.82%) | 1,000.00 | 761.80 | 7.62 |
Utilities Fund | | | | | |
Investor Class | 1.49% | (16.25%) | 1,000.00 | 837.50 | 6.84 |
A-Class | 1.73% | (16.36%) | 1,000.00 | 836.40 | 7.94 |
C-Class | 2.48% | (16.67%) | 1,000.00 | 833.30 | 11.37 |
H-Class | 1.74% | (16.37%) | 1,000.00 | 836.30 | 7.99 |
| | THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 2. Based on hypothetical 5% return (before expenses) | | | | |
Banking Fund | | | | | |
Investor Class | 1.48% | 5.00% | $ 1,000.00 | $ 1,017.60 | $ 7.47 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
Basic Materials Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Biotechnology Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Consumer Products Fund | | | | | |
Investor Class | 1.48% | 5.00% | 1,000.00 | 1,017.60 | 7.47 |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Electronics Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
Energy Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Energy Services Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.49% | 5.00% | 1,000.00 | 1,012.55 | 12.53 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Financial Services Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
Health Care Fund | | | | | |
Investor Class | 1.48% | 5.00% | 1,000.00 | 1,017.60 | 7.47 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.72% | 5.00% | 1,000.00 | 1,016.40 | 8.67 |
8 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Internet Fund | | | | | |
Investor Class | 1.48% | 5.00% | $ 1,000.00 | $ 1,017.60 | $ 7.47 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.72% | 5.00% | 1,000.00 | 1,016.40 | 8.67 |
Leisure Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Precious Metals Fund | | | | | |
Investor Class | 1.39% | 5.00% | 1,000.00 | 1,018.05 | 7.01 |
A-Class | 1.63% | 5.00% | 1,000.00 | 1,016.85 | 8.22 |
C-Class | 2.38% | 5.00% | 1,000.00 | 1,013.10 | 11.98 |
H-Class | 1.63% | 5.00% | 1,000.00 | 1,016.85 | 8.22 |
Real Estate Fund | | | | | |
A-Class | 1.72% | 5.00% | 1,000.00 | 1,016.40 | 8.67 |
C-Class | 2.47% | 5.00% | 1,000.00 | 1,012.65 | 12.43 |
H-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
Retailing Fund | | | | | |
Investor Class | 1.48% | 5.00% | 1,000.00 | 1,017.60 | 7.47 |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Technology Fund | | | | | |
Investor Class | 1.48% | 5.00% | 1,000.00 | 1,017.60 | 7.47 |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Telecommunications Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.49% | 5.00% | 1,000.00 | 1,012.55 | 12.53 |
H-Class | 1.75% | 5.00% | 1,000.00 | 1,016.25 | 8.82 |
Transportation Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
Utilities Fund | | | | | |
Investor Class | 1.49% | 5.00% | 1,000.00 | 1,017.55 | 7.52 |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
3 | Actual cumulative return at net asset value for the period September 30, 2019 to March 31, 2020. |
| | THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
BANKING FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the banking sector, including commercial banks (and their holding companies) and savings and loan institutions (“Banking Companies”).
For the one-year period ended March 31, 2020, Banking Fund Investor Class returned -30.08%, compared with -17.15% for the S&P 500 Financials Index. The broader S&P 500 Index returned -6.98%.
All industries detracted from return, led by regional banks, diversified banks, and consumer finance.
SunTrust Banks, Inc., First Citizens BancShares, Inc. – Class A, and F.N.B. Corp. contributed the most to the Fund’s return for the period. Wells Fargo & Co., Citigroup, Inc., and Capital One Financial Corp. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | March 30, 2001 |
H-Class | April 1, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
JPMorgan Chase & Co. | 4.5% |
Bank of America Corp. | 4.1% |
Citigroup, Inc. | 3.7% |
Wells Fargo & Co. | 3.7% |
U.S. Bancorp | 3.6% |
PNC Financial Services Group, Inc. | 3.3% |
Truist Financial Corp. | 3.1% |
Bank of New York Mellon Corp. | 3.0% |
State Street Corp. | 2.4% |
Capital One Financial Corp. | 2.2% |
Top Ten Total | 33.6% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
10 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (30.08%) | (2.95%) | 0.87% |
A-Class Shares | (30.25%) | (3.18%) | 0.62% |
A-Class Shares with sales charge‡ | (33.57%) | (4.12%) | 0.13% |
C-Class Shares | (30.78%) | (3.91%) | (0.13%) |
C-Class Shares with CDSC§ | (31.47%) | (3.91%) | (0.13%) |
H-Class Shares** | (30.24%) | (3.18%) | 0.50% |
S&P 500 Financials Index | (17.15%) | 3.37% | 6.89% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Financials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
BANKING FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 100.0% |
| | | | | | | | | |
Banks - 90.9% |
JPMorgan Chase & Co. | | | 10,554 | | | $ | 950,177 | |
Bank of America Corp. | | | 41,471 | | | | 880,429 | |
Citigroup, Inc. | | | 18,531 | | | | 780,526 | |
Wells Fargo & Co. | | | 27,022 | | | | 775,531 | |
U.S. Bancorp | | | 22,415 | | | | 772,197 | |
PNC Financial Services Group, Inc. | | | 7,288 | | | | 697,607 | |
Truist Financial Corp. | | | 21,506 | | | | 663,245 | |
Bank of New York Mellon Corp. | | | 18,733 | | | | 630,927 | |
State Street Corp. | | | 9,402 | | | | 500,845 | |
Northern Trust Corp. | | | 6,201 | | | | 467,928 | |
First Republic Bank | | | 5,242 | | | | 431,312 | |
M&T Bank Corp. | | | 3,886 | | | | 401,929 | |
KeyCorp | | | 30,724 | | | | 318,608 | |
Fifth Third Bancorp | | | 21,081 | | | | 313,053 | |
SVB Financial Group* | | | 1,995 | | | | 301,405 | |
Huntington Bancshares, Inc. | | | 36,411 | | | | 298,934 | |
Regions Financial Corp. | | | 32,823 | | | | 294,422 | |
Royal Bank of Canada | | | 4,747 | | | | 292,178 | |
Commerce Bancshares, Inc. | | | 5,656 | | | | 284,780 | |
Toronto-Dominion Bank | | | 6,716 | | | | 284,691 | |
HSBC Holdings plc ADR1 | | | 9,981 | | | | 279,568 | |
Citizens Financial Group, Inc. | | | 14,440 | | | | 271,616 | |
UBS Group AG* | | | 29,140 | | | | 269,836 | |
Bank of Nova Scotia | | | 6,556 | | | | 266,174 | |
Canadian Imperial Bank of Commerce | | | 4,315 | | | | 250,141 | |
HDFC Bank Ltd. ADR | | | 6,333 | | | | 243,567 | |
Prosperity Bancshares, Inc. | | | 5,025 | | | | 242,456 | |
Bank of Montreal | | | 4,663 | | | | 234,362 | |
First Financial Bankshares, Inc. | | | 8,568 | | | | 229,965 | |
Popular, Inc. | | | 6,531 | | | | 228,585 | |
ICICI Bank Ltd. ADR | | | 26,778 | | | | 227,613 | |
Signature Bank | | | 2,784 | | | | 223,806 | |
CVB Financial Corp. | | | 11,095 | | | | 222,455 | |
Credit Suisse Group AG ADR* | | | 27,087 | | | | 219,134 | |
Zions Bancorp North America | | | 7,979 | | | | 213,518 | |
Glacier Bancorp, Inc. | | | 6,207 | | | | 211,069 | |
East West Bancorp, Inc. | | | 7,591 | | | | 195,392 | |
Cullen/Frost Bankers, Inc. | | | 3,480 | | | | 194,149 | |
Valley National Bancorp | | | 25,716 | | | | 187,984 | |
Comerica, Inc. | | | 6,259 | | | | 183,639 | |
Western Alliance Bancorporation | | | 5,895 | | | | 180,446 | |
TCF Financial Corp. | | | 7,949 | | | | 180,124 | |
Pinnacle Financial Partners, Inc. | | | 4,758 | | | | 178,615 | |
Old National Bancorp | | | 13,337 | | | | 175,915 | |
UMB Financial Corp. | | | 3,709 | | | | 172,023 | |
CenterState Bank Corp. | | | 9,683 | | | | 166,838 | |
Umpqua Holdings Corp. | | | 15,282 | | | | 166,574 | |
Simmons First National Corp. — Class A | | | 9,001 | | | | 165,618 | |
United Bankshares, Inc. | | | 7,085 | | | | 163,522 | |
Columbia Banking System, Inc. | | | 5,807 | | | | 155,628 | |
First Hawaiian, Inc. | | | 9,350 | | | | 154,556 | |
Fulton Financial Corp. | | | 13,408 | | | | 154,058 | |
First Horizon National Corp. | | | 18,918 | | | | 152,479 | |
Home BancShares, Inc. | | | 12,695 | | | | 152,213 | |
Synovus Financial Corp. | | | 8,629 | | | | 151,525 | |
Associated Banc-Corp. | | | 11,836 | | | | 151,382 | |
Bank OZK | | | 8,929 | | | | 149,114 | |
Cathay General Bancorp | | | 6,315 | | | | 144,929 | |
PacWest Bancorp | | | 7,682 | | | | 137,661 | |
Webster Financial Corp. | | | 5,766 | | | | 132,041 | |
Ameris Bancorp | | | 5,553 | | | | 131,939 | |
IBERIABANK Corp. | | | 3,637 | | | | 131,514 | |
Wintrust Financial Corp. | | | 3,939 | | | | 129,436 | |
United Community Banks, Inc. | | | 7,006 | | | | 128,280 | |
First Financial Bancorp | | | 8,545 | | | | 127,406 | |
First Midwest Bancorp, Inc. | | | 9,556 | | | | 126,474 | |
Hancock Whitney Corp. | | | 6,198 | | | | 120,985 | |
CIT Group, Inc. | | | 6,321 | | | | 109,101 | |
Texas Capital Bancshares, Inc.* | | | 4,027 | | | | 89,279 | |
Cadence BanCorp | | | 11,782 | | | | 77,172 | |
Total Banks | | | | | | | 19,292,600 | |
| | | | | | | | | |
Savings & Loans - 4.4% |
New York Community Bancorp, Inc. | | | 27,457 | | | | 257,821 | |
People’s United Financial, Inc. | | | 22,500 | | | | 248,625 | |
Investors Bancorp, Inc. | | | 20,821 | | | | 166,360 | |
Sterling Bancorp | | | 13,656 | | | | 142,705 | |
Pacific Premier Bancorp, Inc. | | | 5,785 | | | | 108,990 | |
Total Savings & Loans | | | | | | | 924,501 | |
| | | | | | | | | |
Insurance - 2.5% |
Equitable Holdings, Inc. | | | 18,806 | | | | 271,747 | |
Voya Financial, Inc. | | | 6,507 | | | | 263,859 | |
Total Insurance | | | | | | | 535,606 | |
| | | | | | | | | |
Diversified Financial Services - 2.2% |
Capital One Financial Corp. | | | 9,355 | | | | 471,679 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $32,062,165) | | | | | | | 21,224,386 | |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
BANKING FUND | |
| | | Face
Amount | | | Value | |
| REPURCHASE AGREEMENTS††,2 - 0.3% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 49,246 | | | $ | 49,246 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 18,940 | | | | 18,940 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $68,186) | | | | | | | 68,186 | |
| | | Shares | | | | |
| SECURITIES LENDING COLLATERAL†,3 - 0.2% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 46,079 | | | | 46,079 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $46,079) | | | | | | | 46,079 | |
| | | | | | | | | |
| Total Investments - 100.5% | | | | | | | | |
| (Cost $32,176,430) | | | | | | $ | 21,338,651 | |
| Other Assets & Liabilities, net - (0.5)% | | | | | | | (116,485 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 21,222,166 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 21,224,386 | | | $ | — | | | $ | — | | | $ | 21,224,386 | |
Repurchase Agreements | | | — | | | | 68,186 | | | | — | | | | 68,186 | |
Securities Lending Collateral | | | 46,079 | | | | — | | | | — | | | | 46,079 | |
Total Assets | | $ | 21,270,465 | | | $ | 68,186 | | | $ | — | | | $ | 21,338,651 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $43,752 of securities loaned (cost $32,108,244) | | $ | 21,270,465 | |
Repurchase agreements, at value (cost $68,186) | | | 68,186 | |
Cash | | | 54,666 | |
Receivables: |
Dividends | | | 73,666 | |
Fund shares sold | | | 12,539 | |
Foreign tax reclaims | | | 544 | |
Securities lending income | | | 32 | |
Total assets | | | 21,480,098 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 148,853 | |
Return of securities lending collateral | | | 46,079 | |
Management fees | | | 16,952 | |
Transfer agent and administrative fees | | | 6,589 | |
Portfolio accounting fees | | | 1,995 | |
Distribution and service fees | | | 1,370 | |
Trustees’ fees* | | | 555 | |
Miscellaneous | | | 35,539 | |
Total liabilities | | | 257,932 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 21,222,166 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 35,048,770 | |
Total distributable earnings (loss) | | | (13,826,604 | ) |
Net assets | | $ | 21,222,166 | |
| | | | | |
Investor Class: |
Net assets | | $ | 17,507,231 | |
Capital shares outstanding | | | 337,781 | |
Net asset value per share | | $ | 51.83 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,788,734 | |
Capital shares outstanding | | | 59,366 | |
Net asset value per share | | $ | 46.98 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 49.32 | |
| | | | | |
C-Class: |
Net assets | | $ | 764,049 | |
Capital shares outstanding | | | 18,380 | |
Net asset value per share | | $ | 41.57 | |
| | | | | |
H-Class: |
Net assets | | $ | 162,152 | |
Capital shares outstanding | | | 3,546 | |
Net asset value per share | | $ | 45.73 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $8,700) | | $ | 608,934 | |
Interest | | | 1,933 | |
Income from securities lending, net | | | 97 | |
Total investment income | | | 610,964 | |
| | | | | |
Expenses: |
Management fees | | | 177,245 | |
Distribution and service fees: |
A-Class | | | 11,254 | |
C-Class | | | 12,262 | |
H-Class | | | 5,568 | |
Transfer agent and administrative fees | | | 53,734 | |
Portfolio accounting fees | | | 20,852 | |
Professional fees | | | 8,941 | |
Trustees’ fees* | | | 3,797 | |
Custodian fees | | | 2,856 | |
Line of credit fees | | | 53 | |
Miscellaneous | | | 40,835 | |
Total expenses | | | 337,397 | |
Net investment income | | | 273,567 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 15,650 | |
Net realized gain | | | 15,650 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (12,335,006 | ) |
Net change in unrealized appreciation (depreciation) | | | (12,335,006 | ) |
Net realized and unrealized loss | | | (12,319,356 | ) |
Net decrease in net assets resulting from operations | | $ | (12,045,789 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 273,567 | | | $ | 179,656 | |
Net realized gain on investments | | | 15,650 | | | | 800,892 | |
Net change in unrealized appreciation (depreciation) on investments | | | (12,335,006 | ) | | | (4,677,698 | ) |
Net decrease in net assets resulting from operations | | | (12,045,789 | ) | | | (3,697,150 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (108,737 | ) | | | (97,425 | ) |
A-Class | | | (31,237 | ) | | | (93,207 | ) |
C-Class | | | (9,418 | ) | | | (91,847 | ) |
H-Class | | | (30,264 | ) | | | (5,420 | ) |
Total distributions to shareholders | | | (179,656 | ) | | | (287,899 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 97,783,948 | | | | 106,641,289 | |
A-Class | | | 840,548 | | | | 4,740,864 | |
C-Class | | | 1,729,649 | | | | 5,542,911 | |
H-Class | | | 8,514,542 | | | | 73,023,137 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 108,041 | | | | 91,809 | |
A-Class | | | 30,103 | | | | 89,208 | |
C-Class | | | 9,418 | | | | 91,561 | |
H-Class | | | 30,213 | | | | 5,361 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (75,479,771 | ) | | | (124,774,957 | ) |
A-Class | | | (1,702,700 | ) | | | (3,478,711 | ) |
C-Class | | | (1,910,665 | ) | | | (7,834,143 | ) |
H-Class | | | (10,167,108 | ) | | | (85,075,671 | ) |
Net increase (decrease) from capital share transactions | | | 19,786,218 | | | | (30,937,342 | ) |
Net increase (decrease) in net assets | | | 7,560,773 | | | | (34,922,391 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 13,661,393 | | | | 48,583,784 | |
End of year | | $ | 21,222,166 | | | $ | 13,661,393 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 1,226,311 | | | | 1,312,693 | |
A-Class | | | 11,635 | | | | 65,441 | |
C-Class | | | 27,344 | | | | 79,933 | |
H-Class | | | 120,683 | | | | 1,002,598 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 1,272 | | | | 1,285 | |
A-Class | | | 391 | | | | 1,372 | |
C-Class | | | 138 | | | | 1,575 | |
H-Class | | | 403 | | | | 85 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (970,220 | ) | | | (1,537,374 | ) |
A-Class | | | (24,173 | ) | | | (47,026 | ) |
C-Class | | | (30,321 | ) | | | (117,694 | ) |
H-Class | | | (140,736 | ) | | | (1,164,683 | ) |
Net increase (decrease) in shares | | | 222,727 | | | | (401,795 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 74.58 | | | $ | 86.27 | | | $ | 76.86 | | | $ | 56.13 | | | $ | 62.71 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | 1.14 | | | | .81 | | | | .60 | | | | .53 | | | | .68 | |
Net gain (loss) on investments (realized and unrealized) | | | (23.38 | ) | | | (10.92 | ) | | | 9.12 | | | | 20.51 | | | | (6.97 | ) |
Total from investment operations | | | (22.24 | ) | | | (10.11 | ) | | | 9.72 | | | | 21.04 | | | | (6.29 | ) |
Less distributions from: |
Net investment income | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Total distributions | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Net asset value, end of period | | $ | 51.83 | | | $ | 74.58 | | | $ | 86.27 | | | $ | 76.86 | | | $ | 56.13 | |
|
Total Return | | | (30.08 | %) | | | (11.63 | %) | | | 12.63 | % | | | 37.53 | % | | | (10.10 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 17,507 | | | $ | 5,997 | | | $ | 26,209 | | | $ | 41,473 | | | $ | 7,206 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.47 | % | | | 0.97 | % | | | 0.73 | % | | | 0.74 | % | | | 1.07 | % |
Total expenses | | | 1.48 | % | | | 1.46 | % | | | 1.38 | % | | | 1.38 | % | | | 1.34 | % |
Portfolio turnover rate | | | 360 | % | | | 633 | % | | | 772 | % | | | 907 | % | | | 514 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 67.81 | | | $ | 78.80 | | | $ | 70.41 | | | $ | 51.55 | | | $ | 57.76 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .87 | | | | .57 | | | | .37 | | | | .33 | | | | .40 | |
Net gain (loss) on investments (realized and unrealized) | | | (21.19 | ) | | | (9.98 | ) | | | 8.33 | | | | 18.84 | | | | (6.32 | ) |
Total from investment operations | | | (20.32 | ) | | | (9.41 | ) | | | 8.70 | | | | 19.17 | | | | (5.92 | ) |
Less distributions from: |
Net investment income | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Total distributions | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Net asset value, end of period | | $ | 46.98 | | | $ | 67.81 | | | $ | 78.80 | | | $ | 70.41 | | | $ | 51.55 | |
|
Total Returnb | | | (30.25 | %) | | | (11.85 | %) | | | 12.37 | % | | | 37.21 | % | | | (10.31 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,789 | | | $ | 4,849 | | | $ | 4,076 | | | $ | 5,934 | | | $ | 876 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.23 | % | | | 0.76 | % | | | 0.50 | % | | | 0.51 | % | | | 0.69 | % |
Total expenses | | | 1.73 | % | | | 1.72 | % | | | 1.63 | % | | | 1.63 | % | | | 1.59 | % |
Portfolio turnover rate | | | 360 | % | | | 633 | % | | | 772 | % | | | 907 | % | | | 514 | % |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 60.51 | | | $ | 71.05 | | | $ | 63.98 | | | $ | 47.22 | | | $ | 53.34 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .31 | | | | (.05 | ) | | | (.17 | ) | | | (.05 | ) | | | .03 | |
Net gain (loss) on investments (realized and unrealized) | | | (18.74 | ) | | | (8.91 | ) | | | 7.55 | | | | 17.12 | | | | (5.86 | ) |
Total from investment operations | | | (18.43 | ) | | | (8.96 | ) | | | 7.38 | | | | 17.07 | | | | (5.83 | ) |
Less distributions from: |
Net investment income | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Total distributions | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Net asset value, end of period | | $ | 41.57 | | | $ | 60.51 | | | $ | 71.05 | | | $ | 63.98 | | | $ | 47.22 | |
|
Total Returnb | | | (30.78 | %) | | | (12.51 | %) | | | 11.54 | % | | | 36.18 | % | | | (10.99 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 764 | | | $ | 1,284 | | | $ | 4,079 | | | $ | 5,634 | | | $ | 3,188 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.49 | % | | | (0.07 | %) | | | (0.25 | %) | | | (0.09 | %) | | | 0.05 | % |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 360 | % | | | 633 | % | | | 772 | % | | | 907 | % | | | 514 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 66.00 | | | $ | 76.78 | | | $ | 68.61 | | | $ | 50.22 | | | $ | 56.30 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .74 | | | | .45 | | | | .39 | | | | .29 | | | | .33 | |
Net gain (loss) on investments (realized and unrealized) | | | (20.50 | ) | | | (9.65 | ) | | | 8.09 | | | | 18.41 | | | | (6.12 | ) |
Total from investment operations | | | (19.76 | ) | | | (9.20 | ) | | | 8.48 | | | | 18.70 | | | | (5.79 | ) |
Less distributions from: |
Net investment income | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Total distributions | | | (.51 | ) | | | (1.58 | ) | | | (.31 | ) | | | (.31 | ) | | | (.29 | ) |
Net asset value, end of period | | $ | 45.73 | | | $ | 66.00 | | | $ | 76.78 | | | $ | 68.61 | | | $ | 50.22 | |
|
Total Return | | | (30.24 | %) | | | (11.89 | %) | | | 12.38 | % | | | 37.26 | % | | | (10.34 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 162 | | | $ | 1,531 | | | $ | 14,220 | | | $ | 8,467 | | | $ | 1,360 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.02 | % | | | 0.60 | % | | | 0.52 | % | | | 0.45 | % | | | 0.57 | % |
Total expenses | | | 1.74 | % | | | 1.70 | % | | | 1.62 | % | | | 1.63 | % | | | 1.68 | % |
Portfolio turnover rate | | | 360 | % | | | 633 | % | | | 772 | % | | | 907 | % | | | 514 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
BASIC MATERIALS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in the mining, manufacture, or sale of basic materials, such as lumber, steel, iron, aluminum, concrete, chemicals, and other basic building and manufacturing materials (“Basic Materials Companies”).
For the one-year period ended March 31, 2020, Basic Materials Fund Investor Class returned -23.61%, compared with -16.57% for the S&P 500 Materials Index. The broader S&P 500 Index returned -6.98%.
The gold industry contributed the most to return, followed by the silver industry. Specialty chemicals detracted the most from return, followed by the steel industry and diversified chemicals.
Newmont Corp., Barrick Gold Corp., and AngloGold Ashanti Ltd. ADR contributed the most to the Fund’s return for the period. DuPont de Nemours, Inc., Dow, Inc., and Freeport-McMoRan, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | May 3, 2001 |
H-Class | April 14, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Newmont Corp. | 3.9% |
Air Products & Chemicals, Inc. | 3.7% |
Ecolab, Inc. | 3.6% |
Sherwin-Williams Co. | 3.5% |
Barrick Gold Corp. | 3.1% |
Ball Corp. | 2.8% |
Linde plc | 2.8% |
Corteva, Inc. | 2.3% |
DuPont de Nemours, Inc. | 2.2% |
PPG Industries, Inc. | 2.1% |
Top Ten Total | 30.0% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
18 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (23.61%) | (1.44%) | 0.64% |
A-Class Shares | (23.80%) | (1.68%) | 0.38% |
A-Class Shares with sales charge‡ | (27.43%) | (2.64%) | (0.10%) |
C-Class Shares | (24.35%) | (2.41%) | (0.36%) |
C-Class Shares with CDSC§ | (25.06%) | (2.41%) | (0.36%) |
H-Class Shares** | (23.81%) | (1.69%) | 0.26% |
S&P 500 Materials Index | (16.57%) | 0.57% | 5.57% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Materials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
BASIC MATERIALS FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.9% |
| | | | | | | | | |
Chemicals - 43.1% |
Air Products & Chemicals, Inc. | | | 3,458 | | | $ | 690,251 | |
Ecolab, Inc. | | | 4,284 | | | | 667,576 | |
Sherwin-Williams Co. | | | 1,409 | | | | 647,464 | |
Linde plc | | | 3,011 | | | | 520,903 | |
DuPont de Nemours, Inc. | | | 12,083 | | | | 412,030 | |
PPG Industries, Inc. | | | 4,734 | | | | 395,762 | |
Dow, Inc. | | | 13,079 | | | | 382,430 | |
International Flavors & Fragrances, Inc.1 | | | 3,296 | | | | 336,456 | |
FMC Corp. | | | 4,114 | | | | 336,073 | |
LyondellBasell Industries N.V. — Class A | | | 6,638 | | | | 329,444 | |
RPM International, Inc. | | | 4,670 | | | | 277,865 | |
Celanese Corp. — Class A | | | 3,513 | | | | 257,819 | |
Albemarle Corp. | | | 4,373 | | | | 246,506 | |
Eastman Chemical Co. | | | 4,628 | | | | 215,572 | |
CF Industries Holdings, Inc. | | | 7,701 | | | | 209,467 | |
Balchem Corp. | | | 2,002 | | | | 197,637 | |
Westlake Chemical Corp. | | | 4,860 | | | | 185,506 | |
Axalta Coating Systems Ltd.* | | | 9,945 | | | | 171,750 | |
Mosaic Co. | | | 15,329 | | | | 165,860 | |
Ashland Global Holdings, Inc. | | | 3,152 | | | | 157,821 | |
Huntsman Corp. | | | 10,818 | | | | 156,104 | |
Nutrien Ltd.1 | | | 4,585 | | | | 155,615 | |
Valvoline, Inc. | | | 10,433 | | | | 136,568 | |
Element Solutions, Inc.* | | | 16,285 | | | | 136,142 | |
Olin Corp. | | | 10,715 | | | | 125,044 | |
WR Grace & Co. | | | 3,486 | | | | 124,102 | |
Innospec, Inc. | | | 1,740 | | | | 120,913 | |
PolyOne Corp. | | | 4,940 | | | | 93,712 | |
Chemours Co. | | | 10,082 | | | | 89,427 | |
Ingevity Corp.* | | | 2,450 | | | | 86,240 | |
Total Chemicals | | | | | | | 8,028,059 | |
| | | | | | | | | |
Mining - 19.7% |
Newmont Corp. | | | 15,921 | | | | 720,903 | |
Barrick Gold Corp. | | | 31,247 | | | | 572,445 | |
Freeport-McMoRan, Inc. | | | 37,491 | | | | 253,064 | |
Wheaton Precious Metals Corp. | | | 9,157 | | | | 252,092 | |
Franco-Nevada Corp. | | | 2,503 | | | | 249,099 | |
Rio Tinto plc ADR | | | 5,245 | | | | 238,962 | |
Royal Gold, Inc. | | | 2,692 | | | | 236,115 | |
AngloGold Ashanti Ltd. ADR | | | 11,953 | | | | 198,779 | |
Agnico Eagle Mines Ltd. | | | 4,992 | | | | 198,632 | |
BHP Group Ltd. ADR1 | | | 5,115 | | | | 187,669 | |
Pan American Silver Corp. | | | 10,418 | | | | 149,290 | |
Kirkland Lake Gold Ltd. | | | 5,010 | | | | 148,296 | |
Teck Resources Ltd. — Class B | | | 13,577 | | | | 102,642 | |
Kaiser Aluminum Corp. | | | 1,347 | | | | 93,320 | |
Alcoa Corp.* | | | 10,319 | | | | 63,565 | |
Total Mining | | | | | | | 3,664,873 | |
| | | | | | | | | |
Packaging & Containers - 14.0% |
Ball Corp. | | | 8,088 | | | | 522,970 | |
Crown Holdings, Inc.* | | | 4,956 | | | | 287,646 | |
Packaging Corporation of America | | | 3,277 | | | | 284,542 | |
Westrock Co. | | | 8,772 | | | | 247,897 | |
Sonoco Products Co. | | | 4,530 | | | | 209,966 | |
Amcor plc | | | 24,790 | | | | 201,295 | |
Berry Global Group, Inc.* | | | 5,957 | | | | 200,810 | |
Silgan Holdings, Inc. | | | 6,810 | | | | 197,626 | |
Graphic Packaging Holding Co. | | | 14,925 | | | | 182,085 | |
Sealed Air Corp. | | | 6,919 | | | | 170,968 | |
O-I Glass, Inc. | | | 12,973 | | | | 92,238 | |
Total Packaging & Containers | | | | | | | 2,598,043 | |
| | | | | | | | | |
Iron & Steel - 8.2% |
Vale S.A. ADR | | | 41,208 | | | | 341,614 | |
Nucor Corp. | | | 8,259 | | | | 297,489 | |
Reliance Steel & Aluminum Co. | | | 2,649 | | | | 232,026 | |
Steel Dynamics, Inc. | | | 8,896 | | | | 200,516 | |
Commercial Metals Co. | | | 8,329 | | | | 131,515 | |
ArcelorMittal S.A.1 | | | 10,351 | | | | 96,575 | |
United States Steel Corp.1 | | | 12,790 | | | | 80,705 | |
Allegheny Technologies, Inc.* | | | 8,887 | | | | 75,539 | |
Carpenter Technology Corp. | | | 3,473 | | | | 67,724 | |
Total Iron & Steel | | | | | | | 1,523,703 | |
| | | | | | | | | |
Building Materials - 5.8% |
Vulcan Materials Co. | | | 3,453 | | | | 373,166 | |
Martin Marietta Materials, Inc. | | | 1,714 | | | | 324,340 | |
Eagle Materials, Inc. | | | 2,430 | | | | 141,961 | |
Louisiana-Pacific Corp. | | | 6,963 | | | | 119,624 | |
Summit Materials, Inc. — Class A* | | | 7,640 | | | | 114,600 | |
Total Building Materials | | | | | | | 1,073,691 | |
| | | | | | | | | |
Biotechnology - 2.3% |
Corteva, Inc. | | | 18,501 | | | | 434,773 | |
| | | | | | | | | |
Forest Products & Paper - 2.2% |
International Paper Co. | | | 10,413 | | | | 324,157 | |
Domtar Corp. | | | 4,286 | | | | 92,749 | |
Total Forest Products & Paper | | | | | | | 416,906 | |
| | | | | | | | | |
Household Products & Housewares - 1.5% |
Avery Dennison Corp. | | | 2,807 | | | | 285,949 | |
| | | | | | | | | |
Housewares - 1.4% |
Scotts Miracle-Gro Co. — Class A | | | 2,620 | | | | 268,288 | |
| | | | | | | | | |
Miscellaneous Manufacturing - 1.4% |
AptarGroup, Inc. | | | 2,664 | | | | 265,175 | |
| | | | | | | | | |
Coal - 0.3% |
Warrior Met Coal, Inc. | | | 5,621 | | | | 59,695 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $19,274,802) | | | | | | | 18,619,155 | |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
BASIC MATERIALS FUND | |
| | | Face
Amount | | | Value | |
| REPURCHASE AGREEMENTS††,2 - 0.7% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 88,344 | | | $ | 88,344 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 33,978 | | | | 33,978 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $122,322) | | | | | | | 122,322 | |
| | | Shares | | | | |
| SECURITIES LENDING COLLATERAL†,3 - 3.4% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 641,991 | | | | 641,991 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $641,991) | | | | | | | 641,991 | |
| | | | | | | | | |
| Total Investments - 104.0% | | | | | | | | |
| (Cost $20,039,115) | | | | | | $ | 19,383,468 | |
| Other Assets & Liabilities, net - (4.0)% | | | | | | | (753,668 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 18,629,800 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 18,619,155 | | | $ | — | | | $ | — | | | $ | 18,619,155 | |
Repurchase Agreements | | | — | | | | 122,322 | | | | — | | | | 122,322 | |
Securities Lending Collateral | | | 641,991 | | | | — | | | | — | | | | 641,991 | |
Total Assets | | $ | 19,261,146 | | | $ | 122,322 | | | $ | — | | | $ | 19,383,468 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $623,426 of securities loaned (cost $19,916,793) | | $ | 19,261,146 | |
Repurchase agreements, at value (cost $122,322) | | | 122,322 | |
Cash | | | 98,495 | |
Receivables: |
Dividends | | | 58,049 | |
Fund shares sold | | | 15,161 | |
Foreign tax reclaims | | | 252 | |
Securities lending income | | | 249 | |
Total assets | | | 19,555,674 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 641,991 | |
Deferred foreign capital gain taxes | | | 130,382 | |
Fund shares redeemed | | | 100,534 | |
Management fees | | | 13,944 | |
Transfer agent and administrative fees | | | 5,371 | |
Distribution and service fees | | | 2,145 | |
Portfolio accounting fees | | | 1,641 | |
Trustees’ fees* | | | 456 | |
Miscellaneous | | | 29,410 | |
Total liabilities | | | 925,874 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 18,629,800 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 23,960,865 | |
Total distributable earnings (loss) | | | (5,331,065 | ) |
Net assets | | $ | 18,629,800 | |
| | | | | |
Investor Class: |
Net assets | | $ | 13,313,072 | |
Capital shares outstanding | | | 314,033 | |
Net asset value per share | | $ | 42.39 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,965,733 | |
Capital shares outstanding | | | 75,246 | |
Net asset value per share | | $ | 39.41 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 41.38 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,526,243 | |
Capital shares outstanding | | | 44,672 | |
Net asset value per share | | $ | 34.17 | |
| | | | | |
H-Class: |
Net assets | | $ | 824,752 | |
Capital shares outstanding | | | 21,617 | |
Net asset value per share | | $ | 38.15 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $6,434) | | $ | 737,126 | |
Interest | | | 5,787 | |
Income from securities lending, net | | | 5,769 | |
Total investment income | | | 748,682 | |
| | | | | |
Expenses: |
Management fees | | | 286,857 | |
Distribution and service fees: |
A-Class | | | 14,592 | |
C-Class | | | 24,930 | |
H-Class | | | 3,387 | |
Transfer agent and administrative fees | | | 85,639 | |
Portfolio accounting fees | | | 33,747 | |
Registration fees | | | 32,808 | |
Professional fees | | | 17,593 | |
Trustees’ fees* | | | 8,651 | |
Custodian fees | | | 5,088 | |
Line of credit fees | | | 15 | |
Miscellaneous | | | 27,422 | |
Total expenses | | | 540,729 | |
Net investment income | | | 207,953 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 1,496,946 | |
Net realized gain | | | 1,496,946 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (7,784,086 | ) |
Net change in unrealized appreciation (depreciation) | | | (7,784,086 | ) |
Net realized and unrealized loss | | | (6,287,140 | ) |
Net decrease in net assets resulting from operations | | $ | (6,079,187 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 207,953 | | | $ | 190,591 | |
Net realized gain on investments | | | 1,496,946 | | | | 1,031,495 | |
Net change in unrealized appreciation (depreciation) on investments | | | (7,784,086 | ) | | | (3,199,686 | ) |
Net decrease in net assets resulting from operations | | | (6,079,187 | ) | | | (1,977,600 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (1,041,004 | ) | | | (309,723 | ) |
A-Class | | | (222,796 | ) | | | (105,350 | ) |
C-Class | | | (126,761 | ) | | | (55,959 | ) |
H-Class | | | (70,981 | ) | | | (22,701 | ) |
Total distributions to shareholders | | | (1,461,542 | ) | | | (493,733 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 29,131,033 | | | | 60,791,910 | |
A-Class | | | 1,863,446 | | | | 13,521,729 | |
C-Class | | | 1,431,379 | | | | 1,838,738 | |
H-Class | | | 5,043,330 | | | | 53,900,702 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 1,023,950 | | | | 302,395 | |
A-Class | | | 212,298 | | | | 100,455 | |
C-Class | | | 125,218 | | | | 53,020 | |
H-Class | | | 70,857 | | | | 22,649 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (37,986,062 | ) | | | (84,799,935 | ) |
A-Class | | | (4,863,920 | ) | | | (15,127,115 | ) |
C-Class | | | (2,316,529 | ) | | | (4,248,363 | ) |
H-Class | | | (5,432,603 | ) | | | (61,389,310 | ) |
Net decrease from capital share transactions | | | (11,697,603 | ) | | | (35,033,125 | ) |
Net decrease in net assets | | | (19,238,332 | ) | | | (37,504,458 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 37,868,132 | | | | 75,372,590 | |
End of year | | $ | 18,629,800 | | | $ | 37,868,132 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 497,060 | | | | 1,043,944 | |
A-Class | | | 33,828 | | | | 242,632 | |
C-Class | | | 30,294 | | | | 36,405 | |
H-Class | | | 97,382 | | | | 980,871 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 17,636 | | | | 5,738 | |
A-Class | | | 3,930 | | | | 2,037 | |
C-Class | | | 2,668 | | | | 1,219 | |
H-Class | | | 1,355 | | | | 474 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (660,790 | ) | | | (1,444,031 | ) |
A-Class | | | (87,985 | ) | | | (279,290 | ) |
C-Class | | | (49,672 | ) | | | (85,424 | ) |
H-Class | | | (104,189 | ) | | | (1,122,063 | ) |
Net decrease in shares | | | (218,483 | ) | | | (617,488 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 58.04 | | | $ | 60.37 | | | $ | 55.71 | | | $ | 45.18 | | | $ | 50.18 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .43 | | | | .35 | | | | .11 | | | | .18 | | | | .26 | |
Net gain (loss) on investments (realized and unrealized) | | | (13.42 | ) | | | (1.85 | ) | | | 4.80 | | | | 10.92 | | | | (4.39 | ) |
Total from investment operations | | | (12.99 | ) | | | (1.50 | ) | | | 4.91 | | | | 11.10 | | | | (4.13 | ) |
Less distributions from: |
Net investment income | | | (.90 | ) | | | (.24 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net realized gains | | | (1.76 | ) | | | (.59 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (2.66 | ) | | | (.83 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net asset value, end of period | | $ | 42.39 | | | $ | 58.04 | | | $ | 60.37 | | | $ | 55.71 | | | $ | 45.18 | |
|
Total Return | | | (23.61 | %) | | | (2.36 | %) | | | 8.81 | % | | | 24.65 | % | | | (8.07 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 13,313 | | | $ | 26,704 | | | $ | 51,589 | | | $ | 56,854 | | | $ | 30,653 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.74 | % | | | 0.59 | % | | | 0.18 | % | | | 0.35 | % | | | 0.55 | % |
Total expenses | | | 1.48 | % | | | 1.47 | % | | | 1.38 | % | | | 1.37 | % | | | 1.35 | % |
Portfolio turnover rate | | | 67 | % | | | 247 | % | | | 257 | % | | | 361 | % | | | 471 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 54.27 | | | $ | 56.66 | | | $ | 52.42 | | | $ | 42.65 | | | $ | 47.54 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .26 | | | | .25 | | | | (.01 | ) | | | .03 | | | | .10 | |
Net gain (loss) on investments (realized and unrealized) | | | (12.46 | ) | | | (1.81 | ) | | | 4.50 | | | | 10.31 | | | | (4.12 | ) |
Total from investment operations | | | (12.20 | ) | | | (1.56 | ) | | | 4.49 | | | | 10.34 | | | | (4.02 | ) |
Less distributions from: |
Net investment income | | | (.90 | ) | | | (.24 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net realized gains | | | (1.76 | ) | | | (.59 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (2.66 | ) | | | (.83 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net asset value, end of period | | $ | 39.41 | | | $ | 54.27 | | | $ | 56.66 | | | $ | 52.42 | | | $ | 42.65 | |
|
Total Returnb | | | (23.80 | %) | | | (2.60 | %) | | | 8.56 | % | | | 24.33 | % | | | (8.29 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,966 | | | $ | 6,810 | | | $ | 9,070 | | | $ | 16,355 | | | $ | 4,152 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.48 | % | | | 0.45 | % | | | (0.02 | %) | | | 0.06 | % | | | 0.24 | % |
Total expenses | | | 1.73 | % | | | 1.72 | % | | | 1.63 | % | | | 1.62 | % | | | 1.60 | % |
Portfolio turnover rate | | | 67 | % | | | 247 | % | | | 257 | % | | | 361 | % | | | 471 | % |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 47.73 | | | $ | 50.32 | | | $ | 46.93 | | | $ | 38.52 | | | $ | 43.36 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.11 | ) | | | (.21 | ) | | | (.38 | ) | | | (.29 | ) | | | (.17 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.79 | ) | | | (1.55 | ) | | | 4.02 | | | | 9.27 | | | | (3.80 | ) |
Total from investment operations | | | (10.90 | ) | | | (1.76 | ) | | | 3.64 | | | | 8.98 | | | | (3.97 | ) |
Less distributions from: |
Net investment income | | | (.90 | ) | | | (.24 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net realized gains | | | (1.76 | ) | | | (.59 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (2.66 | ) | | | (.83 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net asset value, end of period | | $ | 34.17 | | | $ | 47.73 | | | $ | 50.32 | | | $ | 46.93 | | | $ | 38.52 | |
|
Total Returnb | | | (24.35 | %) | | | (3.35 | %) | | | 7.75 | % | | | 23.41 | % | | | (8.98 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,526 | | | $ | 2,930 | | | $ | 5,494 | | | $ | 5,824 | | | $ | 2,430 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.23 | %) | | | (0.42 | %) | | | (0.75 | %) | | | (0.66 | %) | | | (0.43 | %) |
Total expenses | | | 2.47 | % | | | 2.47 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 67 | % | | | 247 | % | | | 257 | % | | | 361 | % | | | 471 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 52.62 | | | $ | 54.95 | | | $ | 50.84 | | | $ | 41.37 | | | $ | 46.19 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .27 | | | | .12 | | | | (.05 | ) | | | .01 | | | | .09 | |
Net gain (loss) on investments (realized and unrealized) | | | (12.08 | ) | | | (1.62 | ) | | | 4.41 | | | | 10.03 | | | | (4.04 | ) |
Total from investment operations | | | (11.81 | ) | | | (1.50 | ) | | | 4.36 | | | | 10.04 | | | | (3.95 | ) |
Less distributions from: |
Net investment income | | | (.90 | ) | | | (.24 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net realized gains | | | (1.76 | ) | | | (.59 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (2.66 | ) | | | (.83 | ) | | | (.25 | ) | | | (.57 | ) | | | (.87 | ) |
Net asset value, end of period | | $ | 38.15 | | | $ | 52.62 | | | $ | 54.95 | | | $ | 50.84 | | | $ | 41.37 | |
|
Total Return | | | (23.81 | %) | | | (2.59 | %) | | | 8.57 | % | | | 24.36 | % | | | (8.36 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 825 | | | $ | 1,424 | | | $ | 9,220 | | | $ | 8,077 | | | $ | 2,612 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.51 | % | | | 0.21 | % | | | (0.09 | %) | | | 0.03 | % | | | 0.24 | % |
Total expenses | | | 1.72 | % | | | 1.71 | % | | | 1.62 | % | | | 1.62 | % | | | 1.64 | % |
Portfolio turnover rate | | | 67 | % | | | 247 | % | | | 257 | % | | | 361 | % | | | 471 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
BIOTECHNOLOGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the biotechnology industry, including companies involved in research and development, genetic, or other biological engineering, and in the design, manufacture, or sale of related biotechnology products or services (“Biotechnology Companies”).
For the one-year period ended March 31, 2020, Biotechnology Fund Investor Class returned -9.91%, compared with -1.01% for the S&P 500 Health Care Index. The broader S&P 500 Index returned -6.98%.
All industries detracted from return, led by biotechnology, life sciences tools & services and pharmaceuticals.
Medicines Co., Array BioPharma, Inc., and Biogen, Inc. contributed the most to the Fund’s return for the period. Bluebird Bio, Inc., Amarin Corporation plc ADR, and Sage Therapeutics, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | March 30, 2001 |
H-Class | April 1, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Gilead Sciences, Inc. | 8.0% |
Amgen, Inc. | 7.7% |
AbbVie, Inc. | 7.5% |
Regeneron Pharmaceuticals, Inc. | 6.4% |
Vertex Pharmaceuticals, Inc. | 6.3% |
Biogen, Inc. | 5.9% |
Illumina, Inc. | 4.4% |
Seattle Genetics, Inc. | 3.4% |
Alexion Pharmaceuticals, Inc. | 3.0% |
BioMarin Pharmaceutical, Inc. | 3.0% |
Top Ten Total | 55.6% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
26 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (9.91%) | (0.63%) | 13.18% |
A-Class Shares | (10.14%) | (0.88%) | 12.90% |
A-Class Shares with sales charge‡ | (14.40%) | (1.84%) | 12.35% |
C-Class Shares | (10.80%) | (1.62%) | 12.06% |
C-Class Shares with CDSC§ | (11.65%) | (1.62%) | 12.06% |
H-Class Shares** | (10.12%) | (0.90%) | 12.75% |
S&P 500 Health Care Index | (1.01%) | 6.01% | 12.83% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 27 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
BIOTECHNOLOGY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.6% |
| | | | | | | | | |
Biotechnology - 77.2% |
Gilead Sciences, Inc. | | | 163,732 | | | $ | 12,240,604 | |
Amgen, Inc. | | | 58,142 | | | | 11,787,128 | |
Regeneron Pharmaceuticals, Inc.* | | | 20,112 | | | | 9,820,488 | |
Vertex Pharmaceuticals, Inc.* | | | 40,445 | | | | 9,623,888 | |
Biogen, Inc.* | | | 28,829 | | | | 9,120,919 | |
Illumina, Inc.* | | | 24,935 | | | | 6,810,247 | |
Seattle Genetics, Inc.* | | | 44,885 | | | | 5,178,831 | |
Alexion Pharmaceuticals, Inc.* | | | 51,833 | | | | 4,654,085 | |
BioMarin Pharmaceutical, Inc.* | | | 53,836 | | | | 4,549,142 | |
Incyte Corp.* | | | 57,026 | | | | 4,176,014 | |
Alnylam Pharmaceuticals, Inc.* | | | 35,690 | | | | 3,884,856 | |
ACADIA Pharmaceuticals, Inc.* | | | 69,528 | | | | 2,937,558 | |
Guardant Health, Inc.* | | | 39,438 | | | | 2,744,885 | |
Ionis Pharmaceuticals, Inc.* | | | 56,232 | | | | 2,658,649 | |
Exact Sciences Corp.* | | | 44,657 | | | | 2,590,106 | |
Exelixis, Inc.* | | | 148,806 | | | | 2,562,439 | |
United Therapeutics Corp.* | | | 26,008 | | | | 2,466,209 | |
Ultragenyx Pharmaceutical, Inc.* | | | 43,750 | | | | 1,943,813 | |
Nektar Therapeutics* | | | 104,961 | | | | 1,873,554 | |
PTC Therapeutics, Inc.* | | | 41,710 | | | | 1,860,683 | |
FibroGen, Inc.* | | | 50,727 | | | | 1,762,763 | |
Blueprint Medicines Corp.* | | | 29,512 | | | | 1,725,862 | |
Mirati Therapeutics, Inc.* | | | 21,283 | | | | 1,636,024 | |
Immunomedics, Inc.* | | | 120,092 | | | | 1,618,840 | |
BeiGene Ltd. ADR* | | | 12,580 | | | | 1,548,724 | |
Bluebird Bio, Inc.* | | | 28,921 | | | | 1,329,209 | |
Arrowhead Pharmaceuticals, Inc.* | | | 44,717 | | | | 1,286,508 | |
Intercept Pharmaceuticals, Inc.* | | | 19,573 | | | | 1,232,316 | |
Ligand Pharmaceuticals, Inc. — Class B*,1 | | | 14,791 | | | | 1,075,602 | |
Myriad Genetics, Inc.* | | | 60,813 | | | | 870,234 | |
Sage Therapeutics, Inc.* | | | 20,116 | | | | 577,732 | |
Amarin Corporation plc ADR*,1 | | | 130,623 | | | | 522,492 | |
Total Biotechnology | | | | | | | 118,670,404 | |
| | | | | | | | | |
Pharmaceuticals - 19.2% |
AbbVie, Inc. | | | 151,830 | | | | 11,567,928 | |
Neurocrine Biosciences, Inc.* | | | 34,429 | | | | 2,979,830 | |
Mylan N.V.* | | | 188,846 | | | | 2,815,694 | |
Sarepta Therapeutics, Inc.* | | | 28,749 | | | | 2,812,227 | |
PRA Health Sciences, Inc.* | | | 28,111 | | | | 2,334,337 | |
Jazz Pharmaceuticals plc* | | | 18,477 | | | | 1,842,896 | |
Global Blood Therapeutics, Inc.* | | | 32,973 | | | | 1,684,591 | |
Agios Pharmaceuticals, Inc.* | | | 43,958 | | | | 1,559,630 | |
Alkermes plc* | | | 106,006 | | | | 1,528,606 | |
Portola Pharmaceuticals, Inc.* | | | 63,270 | | | | 451,115 | |
Total Pharmaceuticals | | | | | | | 29,576,854 | |
| | | | | | | | | |
Healthcare-Products - 1.9% |
Bio-Techne Corp. | | | 15,528 | | | | 2,944,419 | |
| | | | | | | | | |
Healthcare-Services - 1.3% |
Syneos Health, Inc.* | | | 49,240 | | | | 1,941,041 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $83,320,381) | | | | | | | 153,132,718 | |
RIGHTS††† - 0.0% |
Biotechnology - 0.0% |
Clinical Data, Inc.*,2 | | | 24,000 | | | | — | |
| | | | | | | | | |
Total Rights | | | | |
(Cost $—) | | | | | | | — | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,3 - 0.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 466,498 | | | | 466,498 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 179,422 | | | | 179,422 | |
Total Repurchase Agreements | | | | |
(Cost $645,920) | | | | | | | 645,920 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,4 - 1.2% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%5 | | | 1,830,522 | | | | 1,830,522 | |
Total Securities Lending Collateral | | | | |
(Cost $1,830,522) | | | | | | | 1,830,522 | |
| | | | | | | | | |
Total Investments - 101.2% | | | | |
(Cost $85,796,823) | | $ | 155,609,160 | |
Other Assets & Liabilities, net - (1.2)% | | | (1,792,478 | ) |
Total Net Assets - 100.0% | | $ | 153,816,682 | |
28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
BIOTECHNOLOGY FUND | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at March 31, 2020. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
3 | Repurchase Agreements — See Note 6. |
4 | Securities lending collateral — See Note 7. |
5 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 153,132,718 | | | $ | — | | | $ | — | | | $ | 153,132,718 | |
Rights | | | — | | | | — | | | | — | * | | | — | |
Repurchase Agreements | | | — | | | | 645,920 | | | | — | | | | 645,920 | |
Securities Lending Collateral | | | 1,830,522 | | | | — | | | | — | | | | 1,830,522 | |
Total Assets | | $ | 154,963,240 | | | $ | 645,920 | | | $ | — | | | $ | 155,609,160 | |
* | Security has a market value of $0. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $1,090,544 of securities loaned (cost $85,150,903) | | $ | 154,963,240 | |
Repurchase agreements, at value (cost $645,920) | | | 645,920 | |
Cash | | | 517,842 | |
Receivables: |
Fund shares sold | | | 1,104,077 | |
Securities lending income | | | 678 | |
Total assets | | | 157,231,757 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 1,830,522 | |
Securities purchased | | | 918,577 | |
Fund shares redeemed | | | 249,554 | |
Management fees | | | 111,953 | |
Transfer agent and administrative fees | | | 41,517 | |
Portfolio accounting fees | | | 13,171 | |
Distribution and service fees | | | 12,982 | |
Trustees’ fees* | | | 3,629 | |
Miscellaneous | | | 233,170 | |
Total liabilities | | | 3,415,075 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 153,816,682 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 81,984,634 | |
Total distributable earnings (loss) | | | 71,832,048 | |
Net assets | | $ | 153,816,682 | |
| | | | | |
Investor Class: |
Net assets | | $ | 122,194,217 | |
Capital shares outstanding | | | 1,703,769 | |
Net asset value per share | | $ | 71.72 | |
| | | | | |
A-Class: |
Net assets | | $ | 14,565,233 | |
Capital shares outstanding | | | 224,350 | |
Net asset value per share | | $ | 64.92 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 68.16 | |
| | | | | |
C-Class: |
Net assets | | $ | 8,691,826 | |
Capital shares outstanding | | | 155,629 | |
Net asset value per share | | $ | 55.85 | |
| | | | | |
H-Class: |
Net assets | | $ | 8,365,406 | |
Capital shares outstanding | | | 133,417 | |
Net asset value per share | | $ | 62.70 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $305) | | $ | 1,640,029 | |
Interest | | | 17,340 | |
Income from securities lending, net | | | 87,333 | |
Total investment income | | | 1,744,702 | |
| | | | | |
Expenses: |
Management fees | | | 1,623,000 | |
Distribution and service fees: |
A-Class | | | 46,813 | |
C-Class | | | 109,773 | |
H-Class | | | 30,180 | |
Transfer agent and administrative fees | | | 485,942 | |
Portfolio accounting fees | | | 190,939 | |
Registration fees | | | 178,488 | |
Professional fees | | | 90,247 | |
Trustees’ fees* | | | 46,220 | |
Custodian fees | | | 27,417 | |
Line of credit fees | | | 985 | |
Miscellaneous | | | 175,023 | |
Total expenses | | | 3,005,027 | |
Net investment loss | | | (1,260,325 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 30,914,727 | |
Net realized gain | | | 30,914,727 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (50,590,210 | ) |
Net change in unrealized appreciation (depreciation) | | | (50,590,210 | ) |
Net realized and unrealized loss | | | (19,675,483 | ) |
Net decrease in net assets resulting from operations | | $ | (20,935,808 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (1,260,325 | ) | | $ | (2,323,341 | ) |
Net realized gain on investments | | | 30,914,727 | | | | 20,676,333 | |
Net change in unrealized appreciation (depreciation) on investments | | | (50,590,210 | ) | | | (2,119,169 | ) |
Net increase (decrease) in net assets resulting from operations | | | (20,935,808 | ) | | | 16,233,823 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (7,452,087 | ) | | | (20,899,598 | ) |
A-Class | | | (840,011 | ) | | | (2,845,408 | ) |
C-Class | | | (571,551 | ) | | | (2,017,464 | ) |
H-Class | | | (695,143 | ) | | | (1,678,559 | ) |
Total distributions to shareholders | | | (9,558,792 | ) | | | (27,441,029 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 103,363,667 | | | | 175,638,002 | |
A-Class | | | 2,369,625 | | | | 9,604,414 | |
C-Class | | | 2,263,964 | | | | 3,143,702 | |
H-Class | | | 35,583,269 | | | | 92,660,528 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 7,185,311 | | | | 19,858,630 | |
A-Class | | | 820,588 | | | | 2,754,996 | |
C-Class | | | 559,459 | | | | 1,958,952 | |
H-Class | | | 694,706 | | | | 1,677,352 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (142,739,172 | ) | | | (220,835,959 | ) |
A-Class | | | (9,063,961 | ) | | | (15,320,741 | ) |
C-Class | | | (6,580,327 | ) | | | (10,075,316 | ) |
H-Class | | | (38,250,877 | ) | | | (99,694,575 | ) |
Net decrease from capital share transactions | | | (43,793,748 | ) | | | (38,630,015 | ) |
Net decrease in net assets | | | (74,288,348 | ) | | | (49,837,221 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 228,105,030 | | | | 277,942,251 | |
End of year | | $ | 153,816,682 | | | $ | 228,105,030 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 1,275,833 | | | | 1,962,897 | |
A-Class | | | 33,243 | | | | 117,041 | |
C-Class | | | 37,703 | | | | 43,301 | |
H-Class | | | 504,782 | | | | 1,191,990 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 85,509 | | | | 267,817 | |
A-Class | | | 10,780 | | | | 40,736 | |
C-Class | | | 8,524 | | | | 33,107 | |
H-Class | | | 9,449 | | | | 25,640 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (1,793,859 | ) | | | (2,509,948 | ) |
A-Class | | | (126,300 | ) | | | (190,944 | ) |
C-Class | | | (106,316 | ) | | | (139,375 | ) |
H-Class | | | (562,751 | ) | | | (1,290,035 | ) |
Net decrease in shares | | | (623,403 | ) | | | (447,773 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 83.02 | | | $ | 87.17 | | | $ | 79.72 | | | $ | 68.30 | | | $ | 93.63 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.44 | ) | | | (.68 | ) | | | (.62 | ) | | | (.57 | ) | | | (.75 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (7.26 | ) | | | 6.42 | | | | 12.77 | | | | 11.99 | | | | (23.30 | ) |
Total from investment operations | | | (7.70 | ) | | | 5.74 | | | | 12.15 | | | | 11.42 | | | | (24.05 | ) |
Less distributions from: |
Net realized gains | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Total distributions | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Net asset value, end of period | | $ | 71.72 | | | $ | 83.02 | | | $ | 87.17 | | | $ | 79.72 | | | $ | 68.30 | |
|
Total Return | | | (9.91 | %) | | | 7.94 | % | | | 15.34 | % | | | 16.71 | % | | | (25.98 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 122,194 | | | $ | 177,344 | | | $ | 210,564 | | | $ | 238,614 | | | $ | 260,476 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.56 | %) | | | (0.79 | %) | | | (0.70 | %) | | | (0.76 | %) | | | (0.84 | %) |
Total expenses | | | 1.48 | % | | | 1.46 | % | | | 1.37 | % | | | 1.37 | % | | | 1.32 | % |
Portfolio turnover rate | | | 64 | % | | | 100 | % | | | 105 | % | | | 207 | % | | | 83 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 75.66 | | | $ | 80.55 | | | $ | 74.16 | | | $ | 63.69 | | | $ | 87.63 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.57 | ) | | | (.82 | ) | | | (.76 | ) | | | (.70 | ) | | | (.91 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (6.57 | ) | | | 5.82 | | | | 11.85 | | | | 11.17 | | | | (21.75 | ) |
Total from investment operations | | | (7.14 | ) | | | 5.00 | | | | 11.09 | | | | 10.47 | | | | (22.66 | ) |
Less distributions from: |
Net realized gains | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Total distributions | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Net asset value, end of period | | $ | 64.92 | | | $ | 75.66 | | | $ | 80.55 | | | $ | 74.16 | | | $ | 63.69 | |
|
Total Returnb | | | (10.14 | %) | | | 7.68 | % | | | 15.04 | % | | | 16.42 | % | | | (26.17 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 14,565 | | | $ | 23,199 | | | $ | 27,370 | | | $ | 36,849 | | | $ | 48,672 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.80 | %) | | | (1.04 | %) | | | (0.93 | %) | | | (1.01 | %) | | | (1.09 | %) |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.62 | % | | | 1.61 | % | | | 1.57 | % |
Portfolio turnover rate | | | 64 | % | | | 100 | % | | | 105 | % | | | 207 | % | | | 83 | % |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 66.05 | | | $ | 72.14 | | | $ | 67.34 | | | $ | 58.27 | | | $ | 80.88 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.97 | ) | | | (1.27 | ) | | | (1.25 | ) | | | (1.11 | ) | | | (1.40 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (5.63 | ) | | | 5.07 | | | | 10.75 | | | | 10.18 | | | | (19.93 | ) |
Total from investment operations | | | (6.60 | ) | | | 3.80 | | | | 9.50 | | | | 9.07 | | | | (21.33 | ) |
Less distributions from: |
Net realized gains | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Total distributions | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Net asset value, end of period | | $ | 55.85 | | | $ | 66.05 | | | $ | 72.14 | | | $ | 67.34 | | | $ | 58.27 | |
|
Total Returnb | | | (10.80 | %) | | | 6.87 | % | | | 14.18 | % | | | 15.55 | % | | | (26.72 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 8,692 | | | $ | 14,248 | | | $ | 20,104 | | | $ | 20,997 | | | $ | 26,185 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.56 | %) | | | (1.79 | %) | | | (1.70 | %) | | | (1.76 | %) | | | (1.84 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.37 | % | | | 2.36 | % | | | 2.33 | % |
Portfolio turnover rate | | | 64 | % | | | 100 | % | | | 105 | % | | | 207 | % | | | 83 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 73.18 | | | $ | 78.26 | | | $ | 72.16 | | | $ | 62.00 | | | $ | 85.38 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.59 | ) | | | (.82 | ) | | | (.69 | ) | | | (.70 | ) | | | (.96 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (6.29 | ) | | | 5.63 | | | | 11.49 | | | | 10.86 | | | | (21.14 | ) |
Total from investment operations | | | (6.88 | ) | | | 4.81 | | | | 10.80 | | | | 10.16 | | | | (22.10 | ) |
Less distributions from: |
Net realized gains | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Total distributions | | | (3.60 | ) | | | (9.89 | ) | | | (4.70 | ) | | | — | | | | (1.28 | ) |
Net asset value, end of period | | $ | 62.70 | | | $ | 73.18 | | | $ | 78.26 | | | $ | 72.16 | | | $ | 62.00 | |
|
Total Return | | | (10.12 | %) | | | 7.66 | % | | | 15.04 | % | | | 16.39 | % | | | (26.22 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 8,365 | | | $ | 13,315 | | | $ | 19,905 | | | $ | 19,308 | | | $ | 27,346 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.85 | %) | | | (1.06 | %) | | | (0.87 | %) | | | (1.04 | %) | | | (1.17 | %) |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.62 | % | | | 1.61 | % | | | 1.65 | % |
Portfolio turnover rate | | | 64 | % | | | 100 | % | | | 105 | % | | | 207 | % | | | 83 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
CONSUMER PRODUCTS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in manufacturing finished goods and services both domestically and internationally (“Consumer Products Companies”).
For the one-year period ended March 31, 2020, Consumer Products Fund Investor Class returned -8.81%, compared with -0.59% for the S&P 500 Consumer Staples Index. The broader S&P 500 Index returned -6.98%.
Household products contributed the most to return, followed by food retail. The tobacco industry detracted the most from return, followed by personal products and packaged foods & meats.
Procter & Gamble Co., Kroger Co., and Hershey Co. contributed the most to the Fund’s return for the period. Altria Group, Inc., Beyond Meat, Inc., and Coty, Inc. – Class A detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | July 6, 1998 |
A-Class | September 1, 2004 |
C-Class | July 24, 2001 |
H-Class | August 17, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Procter & Gamble Co. | 7.3% |
Coca-Cola Co. | 5.9% |
PepsiCo, Inc. | 5.7% |
Philip Morris International, Inc. | 4.1% |
Mondelez International, Inc. — Class A | 3.8% |
Altria Group, Inc. | 3.5% |
Colgate-Palmolive Co. | 3.5% |
Estee Lauder Companies, Inc. — Class A | 3.2% |
Kimberly-Clark Corp. | 3.0% |
General Mills, Inc. | 2.7% |
Top Ten Total | 42.7% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
34 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (8.81%) | 2.09% | 8.45% |
A-Class Shares | (9.04%) | 1.84% | 8.19% |
A-Class Shares with sales charge‡ | (13.36%) | 0.85% | 7.67% |
C-Class Shares | (9.73%) | 1.08% | 7.38% |
C-Class Shares with CDSC§ | (10.60%) | 1.08% | 7.38% |
H-Class Shares** | (9.05%) | 1.82% | 8.04% |
S&P 500 Consumer Staples Index | (0.59%) | 5.19% | 9.99% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Consumer Staples Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 35 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
CONSUMER PRODUCTS FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.2% |
| | | | | | | | | |
Food - 37.6% |
Mondelez International, Inc. — Class A | | | 78,002 | | | $ | 3,906,340 | |
General Mills, Inc. | | | 51,753 | | | | 2,731,006 | |
Hormel Foods Corp. | | | 52,931 | | | | 2,468,702 | |
Kroger Co. | | | 80,392 | | | | 2,421,407 | |
Hershey Co. | | | 18,264 | | | | 2,419,980 | |
Kraft Heinz Co. | | | 94,765 | | | | 2,344,486 | |
Kellogg Co. | | | 34,615 | | | | 2,076,554 | |
McCormick & Company, Inc. | | | 13,618 | | | | 1,922,998 | |
Tyson Foods, Inc. — Class A | | | 30,824 | | | | 1,783,785 | |
Campbell Soup Co. | | | 38,395 | | | | 1,772,313 | |
JM Smucker Co. | | | 15,931 | | | | 1,768,341 | |
Sysco Corp. | | | 37,633 | | | | 1,717,194 | |
Conagra Brands, Inc. | | | 54,237 | | | | 1,591,314 | |
Lamb Weston Holdings, Inc. | | | 20,223 | | | | 1,154,733 | |
Post Holdings, Inc.* | | | 12,388 | | | | 1,027,832 | |
Ingredion, Inc. | | | 13,125 | | | | 990,937 | |
Lancaster Colony Corp. | | | 6,311 | | | | 912,823 | |
Beyond Meat, Inc.*,1 | | | 13,690 | | | | 911,754 | |
Hain Celestial Group, Inc.* | | | 30,760 | | | | 798,837 | |
Pilgrim’s Pride Corp.* | | | 41,950 | | | | 760,134 | |
Sprouts Farmers Market, Inc.* | | | 37,426 | | | | 695,749 | |
Sanderson Farms, Inc. | | | 5,434 | | | | 670,121 | |
US Foods Holding Corp.* | | | 35,740 | | | | 632,955 | |
Simply Good Foods Co.* | | | 28,380 | | | | 546,599 | |
Hostess Brands, Inc.* | | | 45,960 | | | | 489,934 | |
Total Food | | | | | | | 38,516,828 | |
| | | | | | | | | |
Beverages - 25.4% |
Coca-Cola Co. | | | 135,833 | | | | 6,010,610 | |
PepsiCo, Inc. | | | 48,992 | | | | 5,883,939 | |
Keurig Dr Pepper, Inc. | | | 107,876 | | | | 2,618,151 | |
Monster Beverage Corp.* | | | 44,480 | | | | 2,502,445 | |
Brown-Forman Corp. — Class B | | | 40,877 | | | | 2,269,082 | |
Constellation Brands, Inc. — Class A | | | 15,505 | | | | 2,222,797 | |
Molson Coors Beverage Co. — Class B | | | 31,019 | | | | 1,210,051 | |
Boston Beer Company, Inc. — Class A* | | | 2,775 | | | | 1,019,979 | |
Coca-Cola European Partners plc | | | 25,079 | | | | 941,215 | |
Anheuser-Busch InBev S.A. ADR1 | | | 16,239 | | | | 716,465 | |
National Beverage Corp.*,1 | | | 14,840 | | | | 632,926 | |
Total Beverages | | | | | | | 26,027,660 | |
| | | | | | | | | |
Cosmetics & Personal Care - 15.5% |
Procter & Gamble Co. | | | 68,356 | | | | 7,519,160 | |
Colgate-Palmolive Co. | | | 54,345 | | | | 3,606,334 | |
Estee Lauder Companies, Inc. — Class A | | | 20,358 | | | | 3,243,844 | |
Unilever N.V. — Class Y | | | 19,271 | | | | 940,232 | |
Coty, Inc. — Class A | | | 123,269 | | | | 636,068 | |
Total Cosmetics & Personal Care | | | | | | | 15,945,638 | |
| | | | | | | | | |
Agriculture - 11.3% |
Philip Morris International, Inc. | | | 57,694 | | | | 4,209,354 | |
Altria Group, Inc. | | | 93,627 | | | | 3,620,556 | |
Archer-Daniels-Midland Co. | | | 53,423 | | | | 1,879,421 | |
Bunge Ltd. | | | 24,453 | | | | 1,003,307 | |
British American Tobacco plc ADR | | | 25,474 | | | | 870,956 | |
Total Agriculture | | | | | | | 11,583,594 | |
| | | | | | | | | |
Household Products & Housewares - 7.1% |
Kimberly-Clark Corp. | | | 24,171 | | | | 3,090,746 | |
Clorox Co. | | | 13,900 | | | | 2,408,175 | |
Church & Dwight Company, Inc. | | | 28,661 | | | | 1,839,463 | |
Total Household Products & Housewares | | | | | | | 7,338,384 | |
| | | | | | | | | |
Retail - 1.0% |
Casey’s General Stores, Inc. | | | 7,392 | | | | 979,366 | |
| | | | | | | | | |
Pharmaceuticals - 0.8% |
Herbalife Nutrition Ltd.* | | | 26,925 | | | | 785,133 | |
| | | | | | | | | |
Electrical Components & Equipment - 0.5% |
Energizer Holdings, Inc.1 | | | 17,895 | | | | 541,324 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $65,541,430) | | | | | | | 101,717,927 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.3% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 218,315 | | | | 218,315 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 83,967 | | | | 83,967 | |
Total Repurchase Agreements | | | | |
(Cost $302,282) | | | | | | | 302,282 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 2.0% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 2,038,986 | | | | 2,038,986 | |
Total Securities Lending Collateral | | | | |
(Cost $2,038,986) | | | | | | | 2,038,986 | |
| | | | | | | | | |
Total Investments - 101.5% | | | | |
(Cost $67,882,698) | | $ | 104,059,195 | |
Other Assets & Liabilities, net - (1.5)% | | | (1,508,594 | ) |
Total Net Assets - 100.0% | | $ | 102,550,601 | |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
CONSUMER PRODUCTS FUND | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 101,717,927 | | | $ | — | | | $ | — | | | $ | 101,717,927 | |
Repurchase Agreements | | | — | | | | 302,282 | | | | — | | | | 302,282 | |
Securities Lending Collateral | | | 2,038,986 | | | | — | | | | — | | | | 2,038,986 | |
Total Assets | | $ | 103,756,913 | | | $ | 302,282 | | | $ | — | | | $ | 104,059,195 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $1,997,674 of securities loaned (cost $67,580,416) | | $ | 103,756,913 | |
Repurchase agreements, at value (cost $302,282) | | | 302,282 | |
Cash | | | 242,343 | |
Receivables: |
Fund shares sold | | | 370,508 | |
Dividends | | | 291,846 | |
Foreign tax reclaims | | | 16,717 | |
Securities lending income | | | 1,319 | |
Total assets | | | 104,981,928 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 2,038,986 | |
Fund shares redeemed | | | 102,459 | |
Management fees | | | 76,784 | |
Transfer agent and administrative fees | | | 28,809 | |
Distribution and service fees | | | 11,325 | |
Portfolio accounting fees | | | 9,033 | |
Trustees’ fees* | | | 2,508 | |
Miscellaneous | | | 161,423 | |
Total liabilities | | | 2,431,327 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 102,550,601 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 67,779,817 | |
Total distributable earnings (loss) | | | 34,770,784 | |
Net assets | | $ | 102,550,601 | |
| | | | | |
Investor Class: |
Net assets | | $ | 79,889,890 | |
Capital shares outstanding | | | 1,510,855 | |
Net asset value per share | | $ | 52.88 | |
| | | | | |
A-Class: |
Net assets | | $ | 8,560,804 | |
Capital shares outstanding | | | 178,793 | |
Net asset value per share | | $ | 47.88 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 50.27 | |
| | | | | |
C-Class: |
Net assets | | $ | 9,815,524 | |
Capital shares outstanding | | | 244,910 | |
Net asset value per share | | $ | 40.08 | |
| | | | | |
H-Class: |
Net assets | | $ | 4,284,383 | |
Capital shares outstanding | | | 93,281 | |
Net asset value per share | | $ | 45.93 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 3,969,962 | |
Interest | | | 14,004 | |
Income from securities lending, net | | | 95,075 | |
Total investment income | | | 4,079,041 | |
| | | | | |
Expenses: |
Management fees | | | 1,312,236 | |
Distribution and service fees: |
A-Class | | | 30,566 | |
C-Class | | | 129,635 | |
H-Class | | | 24,419 | |
Transfer agent and administrative fees | | | 392,177 | |
Portfolio accounting fees | | | 154,379 | |
Registration fees | | | 140,544 | |
Professional fees | | | 78,691 | |
Trustees’ fees* | | | 37,919 | |
Custodian fees | | | 22,255 | |
Line of credit fees | | | 166 | |
Miscellaneous | | | 138,216 | |
Total expenses | | | 2,461,203 | |
Net investment income | | | 1,617,838 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 13,380,802 | |
Net realized gain | | | 13,380,802 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (24,843,578 | ) |
Net change in unrealized appreciation (depreciation) | | | (24,843,578 | ) |
Net realized and unrealized loss | | | (11,462,776 | ) |
Net decrease in net assets resulting from operations | | $ | (9,844,938 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 1,617,838 | | | $ | 2,388,987 | |
Net realized gain on investments | | | 13,380,802 | | | | 8,964,531 | |
Net change in unrealized appreciation (depreciation) on investments | | | (24,843,578 | ) | | | (5,695,254 | ) |
Net increase (decrease) in net assets resulting from operations | | | (9,844,938 | ) | | | 5,658,264 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (2,921,088 | ) | | | (7,795,828 | ) |
A-Class | | | (339,079 | ) | | | (1,054,007 | ) |
C-Class | | | (437,102 | ) | | | (1,332,532 | ) |
H-Class | | | (268,490 | ) | | | (1,079,571 | ) |
Total distributions to shareholders | | | (3,965,759 | ) | | | (11,261,938 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 103,025,889 | | | | 126,325,719 | |
A-Class | | | 3,280,213 | | | | 8,189,512 | |
C-Class | | | 652,064 | | | | 2,366,920 | |
H-Class | | | 17,063,752 | | | | 45,048,235 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 2,872,298 | | | | 7,631,394 | |
A-Class | | | 332,113 | | | | 1,010,234 | |
C-Class | | | 427,574 | | | | 1,233,939 | |
H-Class | | | 268,419 | | | | 1,079,166 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (158,047,872 | ) | | | (141,637,774 | ) |
A-Class | | | (7,590,061 | ) | | | (20,049,184 | ) |
C-Class | | | (4,860,834 | ) | | | (11,139,212 | ) |
H-Class | | | (22,448,593 | ) | | | (45,804,251 | ) |
Net decrease from capital share transactions | | | (65,025,038 | ) | | | (25,745,302 | ) |
Net decrease in net assets | | | (78,835,735 | ) | | | (31,348,976 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 181,386,336 | | | | 212,735,312 | |
End of year | | $ | 102,550,601 | | | $ | 181,386,336 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 1,679,253 | | | | 2,148,163 | |
A-Class | | | 58,717 | | | | 149,654 | |
C-Class | | | 13,969 | | | | 50,365 | |
H-Class | | | 320,741 | | | | 869,311 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 46,060 | | | | 133,743 | |
A-Class | | | 5,877 | | | | 19,435 | |
C-Class | | | 9,019 | | | | 27,930 | |
H-Class | | | 4,951 | | | | 21,618 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (2,609,348 | ) | | | (2,387,261 | ) |
A-Class | | | (137,756 | ) | | | (375,382 | ) |
C-Class | | | (103,813 | ) | | | (237,726 | ) |
H-Class | | | (426,735 | ) | | | (896,322 | ) |
Net decrease in shares | | | (1,139,065 | ) | | | (476,472 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 59.56 | | | $ | 61.08 | | | $ | 66.06 | | | $ | 62.84 | | | $ | 58.55 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .72 | | | | .92 | | | | .56 | | | | .51 | | | | .61 | |
Net gain (loss) on investments (realized and unrealized) | | | (5.71 | ) | | | 1.40 | | | | (.37 | ) | | | 3.58 | | | | 4.92 | |
Total from investment operations | | | (4.99 | ) | | | 2.32 | | | | .19 | | | | 4.09 | | | | 5.53 | |
Less distributions from: |
Net investment income | | | (.77 | ) | | | (.80 | ) | | | (.44 | ) | | | (.58 | ) | | | (.49 | ) |
Net realized gains | | | (.92 | ) | | | (3.04 | ) | | | (4.73 | ) | | | (.29 | ) | | | (.75 | ) |
Total distributions | | | (1.69 | ) | | | (3.84 | ) | | | (5.17 | ) | | | (.87 | ) | | | (1.24 | ) |
Net asset value, end of period | | $ | 52.88 | | | $ | 59.56 | | | $ | 61.08 | | | $ | 66.06 | | | $ | 62.84 | |
|
Total Return | | | (8.81 | %) | | | 4.09 | % | | | (0.04 | %) | | | 6.62 | % | | | 9.65 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 79,890 | | | $ | 142,633 | | | $ | 152,717 | | | $ | 207,683 | | | $ | 276,578 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.17 | % | | | 1.56 | % | | | 0.86 | % | | | 0.79 | % | | | 1.03 | % |
Total expenses | | | 1.47 | % | | | 1.46 | % | | | 1.38 | % | | | 1.36 | % | | | 1.34 | % |
Portfolio turnover rate | | | 59 | % | | | 84 | % | | | 80 | % | | | 75 | % | | | 104 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 54.21 | | | $ | 56.08 | | | $ | 61.21 | | | $ | 58.43 | | | $ | 54.66 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .51 | | | | .69 | | | | .36 | | | | .33 | | | | .45 | |
Net gain (loss) on investments (realized and unrealized) | | | (5.15 | ) | | | 1.28 | | | | (.32 | ) | | | 3.32 | | | | 4.56 | |
Total from investment operations | | | (4.64 | ) | | | 1.97 | | | | .04 | | | | 3.65 | | | | 5.01 | |
Less distributions from: |
Net investment income | | | (.77 | ) | | | (.80 | ) | | | (.44 | ) | | | (.58 | ) | | | (.49 | ) |
Net realized gains | | | (.92 | ) | | | (3.04 | ) | | | (4.73 | ) | | | (.29 | ) | | | (.75 | ) |
Total distributions | | | (1.69 | ) | | | (3.84 | ) | | | (5.17 | ) | | | (.87 | ) | | | (1.24 | ) |
Net asset value, end of period | | $ | 47.88 | | | $ | 54.21 | | | $ | 56.08 | | | $ | 61.21 | | | $ | 58.43 | |
|
Total Returnb | | | (9.04 | %) | | | 3.82 | % | | | (0.28 | %) | | | 6.35 | % | | | 9.38 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 8,561 | | | $ | 13,659 | | | $ | 25,698 | | | $ | 40,272 | | | $ | 53,560 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.92 | % | | | 1.28 | % | | | 0.60 | % | | | 0.56 | % | | | 0.82 | % |
Total expenses | | | 1.72 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.60 | % |
Portfolio turnover rate | | | 59 | % | | | 84 | % | | | 80 | % | | | 75 | % | | | 104 | % |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 45.98 | | | $ | 48.50 | | | $ | 54.00 | | | $ | 52.04 | | | $ | 49.18 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .08 | | | | .28 | | | | (.07 | ) | | | (.10 | ) | | | .03 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.29 | ) | | | 1.04 | | | | (.26 | ) | | | 2.93 | | | | 4.07 | |
Total from investment operations | | | (4.21 | ) | | | 1.32 | | | | (.33 | ) | | | 2.83 | | | | 4.10 | |
Less distributions from: |
Net investment income | | | (.77 | ) | | | (.80 | ) | | | (.44 | ) | | | (.58 | ) | | | (.49 | ) |
Net realized gains | | | (.92 | ) | | | (3.04 | ) | | | (4.73 | ) | | | (.29 | ) | | | (.75 | ) |
Total distributions | | | (1.69 | ) | | | (3.84 | ) | | | (5.17 | ) | | | (.87 | ) | | | (1.24 | ) |
Net asset value, end of period | | $ | 40.08 | | | $ | 45.98 | | | $ | 48.50 | | | $ | 54.00 | | | $ | 52.04 | |
|
Total Returnb | | | (9.73 | %) | | | 3.06 | % | | | (1.02 | %) | | | 5.55 | % | | | 8.57 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 9,816 | | | $ | 14,976 | | | $ | 23,531 | | | $ | 28,380 | | | $ | 23,799 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.16 | % | | | 0.60 | % | | | (0.13 | %) | | | (0.20 | %) | | | 0.05 | % |
Total expenses | | | 2.47 | % | | | 2.46 | % | | | 2.38 | % | | | 2.36 | % | | | 2.35 | % |
Portfolio turnover rate | | | 59 | % | | | 84 | % | | | 80 | % | | | 75 | % | | | 104 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 52.07 | | | $ | 54.02 | | | $ | 59.15 | | | $ | 56.50 | | | $ | 52.94 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .46 | | | | .69 | | | | .38 | | | | .31 | | | | .39 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.91 | ) | | | 1.20 | | | | (.34 | ) | | | 3.21 | | | | 4.41 | |
Total from investment operations | | | (4.45 | ) | | | 1.89 | | | | .04 | | | | 3.52 | | | | 4.80 | |
Less distributions from: |
Net investment income | | | (.77 | ) | | | (.80 | ) | | | (.44 | ) | | | (.58 | ) | | | (.49 | ) |
Net realized gains | | | (.92 | ) | | | (3.04 | ) | | | (4.73 | ) | | | (.29 | ) | | | (.75 | ) |
Total distributions | | | (1.69 | ) | | | (3.84 | ) | | | (5.17 | ) | | | (.87 | ) | | | (1.24 | ) |
Net asset value, end of period | | $ | 45.93 | | | $ | 52.07 | | | $ | 54.02 | | | $ | 59.15 | | | $ | 56.50 | |
|
Total Return | | | (9.05 | %) | | | 3.84 | % | | | (0.32 | %) | | | 6.35 | % | | | 9.29 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 4,284 | | | $ | 10,118 | | | $ | 10,788 | | | $ | 35,387 | | | $ | 65,702 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.86 | % | | | 1.32 | % | | | 0.65 | % | | | 0.54 | % | | | 0.72 | % |
Total expenses | | | 1.72 | % | | | 1.71 | % | | | 1.63 | % | | | 1.61 | % | | | 1.66 | % |
Portfolio turnover rate | | | 59 | % | | | 84 | % | | | 80 | % | | | 75 | % | | | 104 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
ELECTRONICS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the electronics sector, including semiconductor manufacturers and distributors, and makers and vendors of other electronic components and devices (“Electronics Companies”).
For the one-year period ended March 31, 2020, Electronics Fund Investor Class returned 8.99%, compared with 10.43% for the S&P 500 Information Technology Index. The broader S&P 500 Index returned -6.98%.
Semiconductors contributed the most to return, followed by semiconductor equipment. Electrical components & equipment was the only detractor from return.
NVIDIA Corp., Advanced Micro Devices, Inc., and Cypress Semiconductor Corp. contributed the most to the Fund’s return for the period. Xilinx, Inc., Broadcom, Inc., and ON Semiconductor Corp. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | March 26, 2001 |
H-Class | April 2, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Intel Corp. | 9.1% |
NVIDIA Corp. | 8.2% |
Texas Instruments, Inc. | 5.3% |
Broadcom, Inc. | 5.1% |
QUALCOMM, Inc. | 4.7% |
Advanced Micro Devices, Inc. | 4.5% |
Micron Technology, Inc. | 3.6% |
Applied Materials, Inc. | 3.5% |
Lam Research Corp. | 3.3% |
Analog Devices, Inc. | 3.1% |
Top Ten Total | 50.4% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
42 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | 8.99% | 12.66% | 11.23% |
A-Class Shares | 8.72% | 12.39% | 10.96% |
A-Class Shares with sales charge‡ | 3.56% | 11.30% | 10.42% |
C-Class Shares | 7.91% | 11.55% | 10.13% |
C-Class Shares with CDSC§ | 6.91% | 11.55% | 10.13% |
H-Class Shares** | 8.72% | 12.36% | 10.80% |
S&P 500 Information Technology Index | 10.43% | 17.05% | 15.79% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
ELECTRONICS FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.6% |
| | | | | | | | | |
Semiconductors - 94.0% |
Intel Corp. | | | 74,833 | | | $ | 4,049,962 | |
NVIDIA Corp. | | | 13,846 | | | | 3,649,806 | |
Texas Instruments, Inc. | | | 23,649 | | | | 2,363,245 | |
Broadcom, Inc. | | | 9,674 | | | | 2,293,705 | |
QUALCOMM, Inc. | | | 31,154 | | | | 2,107,568 | |
Advanced Micro Devices, Inc.* | | | 44,076 | | | | 2,004,576 | |
Micron Technology, Inc.* | | | 38,670 | | | | 1,626,460 | |
Applied Materials, Inc. | | | 33,704 | | | | 1,544,317 | |
Lam Research Corp. | | | 6,061 | | | | 1,454,640 | |
Analog Devices, Inc. | | | 15,209 | | | | 1,363,487 | |
KLA Corp. | | | 8,241 | | | | 1,184,561 | |
Xilinx, Inc. | | | 14,103 | | | | 1,099,188 | |
Marvell Technology Group Ltd. | | | 43,732 | | | | 989,655 | |
NXP Semiconductor N.V. | | | 11,473 | | | | 951,456 | |
Skyworks Solutions, Inc. | | | 10,372 | | | | 927,049 | |
Taiwan Semiconductor Manufacturing Company Ltd. ADR | | | 18,860 | | | | 901,319 | |
Microchip Technology, Inc. | | | 13,260 | | | | 899,028 | |
Maxim Integrated Products, Inc. | | | 18,162 | | | | 882,855 | |
Cypress Semiconductor Corp. | | | 34,541 | | | | 805,496 | |
ASML Holding N.V. — Class G | | | 2,931 | | | | 766,867 | |
Teradyne, Inc. | | | 13,583 | | | | 735,791 | |
Monolithic Power Systems, Inc. | | | 4,263 | | | | 713,882 | |
Qorvo, Inc.* | | | 8,584 | | | | 692,128 | |
Mellanox Technologies Ltd.* | | | 5,503 | | | | 667,624 | |
Entegris, Inc. | | | 14,119 | | | | 632,108 | |
Inphi Corp.* | | | 6,764 | | | | 535,506 | |
MKS Instruments, Inc. | | | 6,056 | | | | 493,261 | |
STMicroelectronics N.V. — Class Y1 | | | 22,612 | | | | 483,218 | |
Cirrus Logic, Inc.* | | | 7,221 | | | | 473,914 | |
Cree, Inc.* | | | 12,965 | | | | 459,739 | |
Silicon Laboratories, Inc.* | | | 5,277 | | | | 450,709 | |
ON Semiconductor Corp.* | | | 36,012 | | | | 447,989 | |
Cabot Microelectronics Corp. | | | 3,860 | | | | 440,580 | |
Power Integrations, Inc. | | | 4,848 | | | | 428,224 | |
Lattice Semiconductor Corp.* | | | 22,650 | | | | 403,623 | |
Semtech Corp.* | | | 9,889 | | | | 370,838 | |
Diodes, Inc.* | | | 8,552 | | | | 347,511 | |
Brooks Automation, Inc. | | | 11,355 | | | | 346,328 | |
Synaptics, Inc.* | | | 5,932 | | | | 343,285 | |
Ambarella, Inc.* | | | 6,614 | | | | 321,176 | |
MACOM Technology Solutions Holdings, Inc.* | | | 13,797 | | | | 261,177 | |
Total Semiconductors | | | | | | | 41,913,851 | |
| | | | | | | | | |
Energy-Alternate Sources - 3.7% |
SolarEdge Technologies, Inc.* | | | 7,817 | | | | 640,056 | |
Enphase Energy, Inc.* | | | 18,806 | | | | 607,245 | |
First Solar, Inc.* | | | 11,763 | | | | 424,174 | |
Total Energy-Alternate Sources | | | | | | | 1,671,475 | |
| | | | | | | | | |
Electrical Components & Equipment - 1.2% |
Universal Display Corp. | | | 4,198 | | | | 553,212 | |
| | | | | | | | | |
Electronics - 0.7% |
Advanced Energy Industries, Inc.* | | | 6,410 | | | | 310,821 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $38,710,079) | | | | | | | 44,449,359 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.1% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 18,067 | | | | 18,067 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 6,949 | | | | 6,949 | |
Total Repurchase Agreements | | | | |
(Cost $25,016) | | | | | | | 25,016 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 0.9% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 382,670 | | | | 382,670 | |
Total Securities Lending Collateral | | | | |
(Cost $382,670) | | | | | | | 382,670 | |
| | | | | | | | | |
Total Investments - 100.6% | | | | |
(Cost $39,117,765) | | $ | 44,857,045 | |
Other Assets & Liabilities, net - (0.6)% | | | (260,618 | ) |
Total Net Assets - 100.0% | | $ | 44,596,427 | |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
ELECTRONICS FUND | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 44,449,359 | | | $ | — | | | $ | — | | | $ | 44,449,359 | |
Repurchase Agreements | | | — | | | | 25,016 | | | | — | | | | 25,016 | |
Securities Lending Collateral | | | 382,670 | | | | — | | | | — | | | | 382,670 | |
Total Assets | | $ | 44,832,029 | | | $ | 25,016 | | | $ | — | | | $ | 44,857,045 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $375,984 of securities loaned (cost $39,092,749) | | $ | 44,832,029 | |
Repurchase agreements, at value (cost $25,016) | | | 25,016 | |
Cash | | | 20,056 | |
Receivables: |
Securities sold | | | 2,031,527 | |
Fund shares sold | | | 39,824 | |
Dividends | | | 26,030 | |
Securities lending income | | | 152 | |
Total assets | | | 46,974,634 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 1,867,324 | |
Return of securities lending collateral | | | 382,670 | |
Management fees | | | 34,691 | |
Transfer agent and administrative fees | | | 13,612 | |
Portfolio accounting fees | | | 4,081 | |
Distribution and service fees | | | 2,306 | |
Trustees’ fees* | | | 1,126 | |
Miscellaneous | | | 72,397 | |
Total liabilities | | | 2,378,207 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 44,596,427 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 43,076,608 | |
Total distributable earnings (loss) | | | 1,519,819 | |
Net assets | | $ | 44,596,427 | |
| | | | | |
Investor Class: |
Net assets | | $ | 38,633,862 | |
Capital shares outstanding | | | 280,664 | |
Net asset value per share | | $ | 137.65 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,119,673 | |
Capital shares outstanding | | | 16,682 | |
Net asset value per share | | $ | 127.06 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 133.40 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,701,379 | |
Capital shares outstanding | | | 15,208 | |
Net asset value per share | | $ | 111.87 | |
| | | | | |
H-Class: |
Net assets | | $ | 2,141,513 | |
Capital shares outstanding | | | 17,363 | |
Net asset value per share | | $ | 123.34 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $3,006) | | $ | 847,852 | |
Interest | | | 6,429 | |
Income from securities lending, net | | | 2,893 | |
Total investment income | | | 857,174 | |
| | | | | |
Expenses: |
Management fees | | | 490,166 | |
Distribution and service fees: |
A-Class | | | 11,611 | |
C-Class | | | 20,570 | |
H-Class | | | 14,000 | |
Transfer agent and administrative fees | | | 147,575 | |
Portfolio accounting fees | | | 57,666 | |
Professional fees | | | 26,670 | |
Trustees’ fees* | | | 9,173 | |
Custodian fees | | | 8,098 | |
Line of credit fees | | | 112 | |
Miscellaneous | | | 113,702 | |
Total expenses | | | 899,343 | |
Net investment loss | | | (42,169 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 1,148,578 | |
Net realized gain | | | 1,148,578 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (42,610 | ) |
Net change in unrealized appreciation (depreciation) | | | (42,610 | ) |
Net realized and unrealized gain | | | 1,105,968 | |
Net increase in net assets resulting from operations | | $ | 1,063,799 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income (loss) | | $ | (42,169 | ) | | $ | 7,066 | |
Net realized gain on investments | | | 1,148,578 | | | | 202,557 | |
Net change in unrealized appreciation (depreciation) on investments | | | (42,610 | ) | | | (3,295,899 | ) |
Net increase (decrease) in net assets resulting from operations | | | 1,063,799 | | | | (3,086,276 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (5,526 | ) | | | (1,489,940 | ) |
A-Class | | | (535 | ) | | | (286,771 | ) |
C-Class | | | (238 | ) | | | (117,497 | ) |
H-Class | | | (767 | ) | | | (92,551 | ) |
Total distributions to shareholders | | | (7,066 | ) | | | (1,986,759 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 165,434,553 | | | | 69,011,457 | |
A-Class | | | 9,059,406 | | | | 12,638,504 | |
C-Class | | | 3,919,399 | | | | 1,776,804 | |
H-Class | | | 45,691,721 | | | | 99,278,587 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 5,505 | | | | 1,470,138 | |
A-Class | | | 231 | | | | 143,678 | |
C-Class | | | 236 | | | | 112,532 | |
H-Class | | | 766 | | | | 92,532 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (145,938,377 | ) | | | (103,905,626 | ) |
A-Class | | | (11,409,121 | ) | | | (11,505,886 | ) |
C-Class | | | (3,756,574 | ) | | | (3,275,148 | ) |
H-Class | | | (47,020,457 | ) | | | (124,802,844 | ) |
Net increase (decrease) from capital share transactions | | | 15,987,288 | | | | (58,965,272 | ) |
Net increase (decrease) in net assets | | | 17,044,021 | | | | (64,038,307 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 27,552,406 | | | | 91,590,713 | |
End of year | | $ | 44,596,427 | | | $ | 27,552,406 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 1,149,672 | | | | 539,688 | |
A-Class | | | 68,041 | | | | 108,795 | |
C-Class | | | 34,152 | | | | 16,457 | |
H-Class | | | 378,999 | | | | 823,516 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 35 | | | | 13,668 | |
A-Class | | | 2 | | | | 1,443 | |
C-Class | | | 2 | | | | 1,271 | |
H-Class | | | 5 | | | | 957 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (1,016,632 | ) | | | (803,674 | ) |
A-Class | | | (84,795 | ) | | | (101,201 | ) |
C-Class | | | (31,651 | ) | | | (29,683 | ) |
H-Class | | | (394,124 | ) | | | (1,041,614 | ) |
Net increase (decrease) in shares | | | 103,706 | | | | (470,377 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 126.31 | | | $ | 136.98 | | | $ | 110.00 | | | $ | 81.23 | | | $ | 83.54 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | — | c | | | .27 | | | | (.11 | ) | | | .15 | | | | .02 | |
Net gain (loss) on investments (realized and unrealized) | | | 11.35 | | | | (.29 | ) | | | 27.15 | | | | 28.62 | | | | (2.20 | ) |
Total from investment operations | | | 11.35 | | | | (.02 | ) | | | 27.04 | | | | 28.77 | | | | (2.18 | ) |
Less distributions from: |
Net investment income | | | (.01 | ) | | | — | | | | (.06 | ) | | | — | | | | (.13 | ) |
Net realized gains | | | — | | | | (10.65 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (.01 | ) | | | (10.65 | ) | | | (.06 | ) | | | — | | | | (.13 | ) |
Net asset value, end of period | | $ | 137.65 | | | $ | 126.31 | | | $ | 136.98 | | | $ | 110.00 | | | $ | 81.23 | |
|
Total Return | | | 8.99 | % | | | 1.35 | % | | | 24.59 | % | | | 35.41 | % | | | (2.61 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 38,634 | | | $ | 18,642 | | | $ | 54,505 | | | $ | 51,722 | | | $ | 8,217 | |
Ratios to average net assets: |
Net investment income (loss) | | | — | d | | | 0.21 | % | | | (0.08 | %) | | | 0.16 | % | | | 0.02 | % |
Total expenses | | | 1.48 | % | | | 1.46 | % | | | 1.38 | % | | | 1.38 | % | | | 1.34 | % |
Portfolio turnover rate | | | 265 | % | | | 521 | % | | | 457 | % | | | 643 | % | | | 769 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 116.88 | | | $ | 127.98 | | | $ | 103.03 | | | $ | 76.25 | | | $ | 78.62 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.31 | ) | | | (.03 | ) | | | (.33 | ) | | | (.18 | ) | | | (.20 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 10.50 | | | | (.42 | ) | | | 25.34 | | | | 26.96 | | | | (2.04 | ) |
Total from investment operations | | | 10.19 | | | | (.45 | ) | | | 25.01 | | | | 26.78 | | | | (2.24 | ) |
Less distributions from: |
Net investment income | | | (.01 | ) | | | — | | | | (.06 | ) | | | — | | | | (.13 | ) |
Net realized gains | | | — | | | | (10.65 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (.01 | ) | | | (10.65 | ) | | | (.06 | ) | | | — | | | | (.13 | ) |
Net asset value, end of period | | $ | 127.06 | | | $ | 116.88 | | | $ | 127.98 | | | $ | 103.03 | | | $ | 76.25 | |
|
Total Returnb | | | 8.72 | % | | | 1.10 | % | | | 24.29 | % | | | 35.11 | % | | | (2.84 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,120 | | | $ | 3,908 | | | $ | 3,122 | | | $ | 4,408 | | | $ | 1,762 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.23 | %) | | | (0.02 | %) | | | (0.29 | %) | | | (0.19 | %) | | | (0.26 | %) |
Total expenses | | | 1.73 | % | | | 1.72 | % | | | 1.63 | % | | | 1.63 | % | | | 1.60 | % |
Portfolio turnover rate | | | 265 | % | | | 521 | % | | | 457 | % | | | 643 | % | | | 769 | % |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 103.69 | | | $ | 115.77 | | | $ | 93.90 | | | $ | 70.02 | | | $ | 72.76 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (1.14 | ) | | | (.91 | ) | | | (1.14 | ) | | | (.69 | ) | | | (.63 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 9.33 | | | | (.52 | ) | | | 23.07 | | | | 24.57 | | | | (1.98 | ) |
Total from investment operations | | | 8.19 | | | | (1.43 | ) | | | 21.93 | | | | 23.88 | | | | (2.61 | ) |
Less distributions from: |
Net investment income | | | (.01 | ) | | | — | | | | (.06 | ) | | | — | | | | (.13 | ) |
Net realized gains | | | — | | | | (10.65 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (.01 | ) | | | (10.65 | ) | | | (.06 | ) | | | — | | | | (.13 | ) |
Net asset value, end of period | | $ | 111.87 | | | $ | 103.69 | | | $ | 115.77 | | | $ | 93.90 | | | $ | 70.02 | |
|
Total Returnb | | | 7.91 | % | | | 0.34 | % | | | 23.36 | % | | | 34.09 | % | | | (3.58 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,701 | | | $ | 1,317 | | | $ | 2,855 | | | $ | 2,556 | | | $ | 719 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.96 | %) | | | (0.83 | %) | | | (1.07 | %) | | | (0.85 | %) | | | (0.91 | %) |
Total expenses | | | 2.48 | % | | | 2.45 | % | | | 2.38 | % | | | 2.38 | % | | | 2.35 | % |
Portfolio turnover rate | | | 265 | % | | | 521 | % | | | 457 | % | | | 643 | % | | | 769 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016f | |
Per Share Data |
Net asset value, beginning of period | | $ | 113.47 | | | $ | 124.62 | | | $ | 100.33 | | | $ | 74.32 | | | $ | 76.66 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.30 | ) | | | (.54 | ) | | | (.41 | ) | | | (.08 | ) | | | (.30 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 10.18 | | | | .04 | e | | | 24.76 | | | | 26.09 | | | | (1.91 | ) |
Total from investment operations | | | 9.88 | | | | (.50 | ) | | | 24.35 | | | | 26.01 | | | | (2.21 | ) |
Less distributions from: |
Net investment income | | | (.01 | ) | | | — | | | | (.06 | ) | | | — | | | | (.13 | ) |
Net realized gains | | | — | | | | (10.65 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (.01 | ) | | | (10.65 | ) | | | (.06 | ) | | | — | | | | (.13 | ) |
Net asset value, end of period | | $ | 123.34 | | | $ | 113.47 | | | $ | 124.62 | | | $ | 100.33 | | | $ | 74.32 | |
|
Total Return | | | 8.72 | % | | | 1.08 | % | | | 24.29 | % | | | 34.98 | % | | | (2.88 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,142 | | | $ | 3,686 | | | $ | 31,109 | | | $ | 23,134 | | | $ | 11,257 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.22 | %) | | | (0.45 | %) | | | (0.36 | %) | | | (0.09 | %) | | | (0.40 | %) |
Total expenses | | | 1.73 | % | | | 1.68 | % | | | 1.63 | % | | | 1.63 | % | | | 1.74 | % |
Portfolio turnover rate | | | 265 | % | | | 521 | % | | | 457 | % | | | 643 | % | | | 769 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Less than $0.01 per share. |
d | Less than 0.01% or (0.01%). |
e | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and repurchases of Fund shares in relation to fluctuating market value of the investments of the Fund. |
f | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
ENERGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies involved in the energy field, including the exploration, production, and development of oil, gas, coal, and alternative sources of energy (“Energy Companies”).
For the one-year period ended March 31, 2020, Energy Fund Investor Class returned -59.61%, compared with -52.42% for the S&P 500 Energy Index. The broader S&P 500 Index returned -6.98%.
All industries detracted from return, led by exploration & production, integrated oil & gas, and storage & transportation.
Anadarko Petroleum Corp., Renewable Energy Group, Inc., and Ecopetrol SA ADR contributed the most to the Fund’s return for the period. Exxon Mobil Corp., Chevron Corp., and Occidental Petroleum Corp. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 21, 1998 |
A-Class | September 1, 2004 |
C-Class | April 19, 2001 |
H-Class | May 5, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Exxon Mobil Corp. | 10.0% |
Chevron Corp. | 9.7% |
Kinder Morgan, Inc. | 4.4% |
ConocoPhillips | 4.3% |
Phillips 66 | 3.6% |
Williams Companies, Inc. | 3.4% |
BP plc ADR | 3.3% |
EOG Resources, Inc. | 3.2% |
Valero Energy Corp. | 3.2% |
Cabot Oil & Gas Corp. — Class A | 2.8% |
Top Ten Total | 47.9% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 51 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (59.61%) | (21.07%) | (9.98%) |
A-Class Shares | (59.69%) | (21.26%) | (10.20%) |
A-Class Shares with sales charge‡ | (61.60%) | (22.02%) | (10.63%) |
C-Class Shares | (60.01%) | (21.85%) | (10.88%) |
C-Class Shares with CDSC§ | (60.40%) | (21.85%) | (10.88%) |
H-Class Shares** | (59.73%) | (21.30%) | (10.34%) |
S&P 500 Energy Index | (52.42%) | (14.22%) | (3.75%) |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Energy Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
52 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
ENERGY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.7% |
| | | | | | | | | |
Oil & Gas - 71.7% |
Exxon Mobil Corp. | | | 16,478 | | | $ | 625,670 | |
Chevron Corp. | | | 8,433 | | | | 611,055 | |
ConocoPhillips | | | 8,768 | | | | 270,054 | |
Phillips 66 | | | 4,180 | | | | 224,257 | |
BP plc ADR | | | 8,441 | | | | 205,876 | |
EOG Resources, Inc. | | | 5,604 | | | | 201,296 | |
Valero Energy Corp. | | | 4,382 | | | | 198,768 | |
Cabot Oil & Gas Corp. — Class A | | | 10,248 | | | | 176,163 | |
Marathon Petroleum Corp. | | | 6,839 | | | | 161,537 | |
Pioneer Natural Resources Co. | | | 2,217 | | | | 155,523 | |
Hess Corp. | | | 4,651 | | | | 154,878 | |
Concho Resources, Inc. | | | 3,261 | | | | 139,734 | |
Occidental Petroleum Corp. | | | 10,101 | | | | 116,970 | |
Royal Dutch Shell plc — Class A ADR | | | 2,816 | | | | 98,250 | |
Petroleo Brasileiro S.A. ADR | | | 16,752 | | | | 92,136 | |
HollyFrontier Corp. | | | 3,741 | | | | 91,692 | |
Diamondback Energy, Inc. | | | 2,846 | | | | 74,565 | |
Equities Corp. | | | 10,036 | | | | 70,955 | |
Suncor Energy, Inc. | | | 4,274 | | | | 67,529 | |
Noble Energy, Inc. | | | 9,459 | | | | 57,132 | |
Devon Energy Corp. | | | 8,153 | | | | 56,337 | |
CVR Energy, Inc. | | | 3,307 | | | | 54,665 | |
Marathon Oil Corp. | | | 16,532 | | | | 54,390 | |
Continental Resources, Inc.1 | | | 6,982 | | | | 53,342 | |
Helmerich & Payne, Inc. | | | 3,324 | | | | 52,021 | |
Cimarex Energy Co. | | | 2,962 | | | | 49,850 | |
Parsley Energy, Inc. — Class A | | | 8,680 | | | | 49,736 | |
Canadian Natural Resources Ltd. | | | 3,611 | | | | 48,929 | |
Equinor ASA ADR | | | 4,008 | | | | 48,817 | |
Delek US Holdings, Inc. | | | 3,082 | | | | 48,572 | |
WPX Energy, Inc.* | | | 11,761 | | | | 35,871 | |
Apache Corp. | | | 8,567 | | | | 35,810 | |
Murphy Oil Corp.1 | | | 5,224 | | | | 32,023 | |
PBF Energy, Inc. — Class A | | | 4,122 | | | | 29,184 | |
Patterson-UTI Energy, Inc. | | | 9,233 | | | | 21,698 | |
PDC Energy, Inc.* | | | 3,191 | | | | 19,816 | |
Matador Resources Co.*,1 | | | 5,418 | | | | 13,437 | |
SM Energy Co. | | | 6,758 | | | | 8,245 | |
Total Oil & Gas | | | | | | | 4,506,783 | |
| | | | | | | | | |
Pipelines - 17.1% |
Kinder Morgan, Inc. | | | 19,690 | | | | 274,085 | |
Williams Companies, Inc. | | | 15,100 | | | | 213,665 | |
Cheniere Energy, Inc.* | | | 4,285 | | | | 143,548 | |
Enbridge, Inc. | | | 3,934 | | | | 114,440 | |
ONEOK, Inc. | | | 4,972 | | | | 108,439 | |
TC Energy Corp. | | | 2,184 | | | | 96,751 | |
Equitrans Midstream Corp. | | | 9,710 | | | | 48,841 | |
Plains GP Holdings, LP — Class A* | | | 6,520 | | | | 36,577 | |
Targa Resources Corp. | | | 5,129 | | | | 35,442 | |
Total Pipelines | | | | | | | 1,071,788 | |
| | | | | | | | | |
Oil & Gas Services - 9.3% |
Schlumberger Ltd. | | | 12,432 | | | | 167,708 | |
Baker Hughes Co. | | | 13,419 | | | | 140,899 | |
Halliburton Co. | | | 12,603 | | | | 86,331 | |
National Oilwell Varco, Inc. | | | 8,261 | | | | 81,206 | |
TechnipFMC plc | | | 8,533 | | | | 57,512 | |
Apergy Corp.*,1 | | | 3,158 | | | | 18,158 | |
Core Laboratories N.V. | | | 1,637 | | | | 16,927 | |
Oceaneering International, Inc.* | | | 5,383 | | | | 15,826 | |
Total Oil & Gas Services | | | | | | | 584,567 | |
| | | | | | | | | |
Metal Fabricate & Hardware - 0.9% |
Tenaris S.A. ADR | | | 4,531 | | | | 54,598 | |
| | | | | | | | | |
Transportation - 0.7% |
Golar LNG Ltd. | | | 5,472 | | | | 43,119 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $5,845,976) | | | | | | | 6,260,855 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 19,782 | | | | 19,782 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 7,609 | | | | 7,609 | |
Total Repurchase Agreements | | | | |
(Cost $27,391) | | | | | | | 27,391 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 1.3% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 82,547 | | | | 82,547 | |
Total Securities Lending Collateral | | | | |
(Cost $82,547) | | | | | | | 82,547 | |
| | | | | | | | | |
Total Investments - 101.4% | | | | |
(Cost $5,955,914) | | $ | 6,370,793 | |
Other Assets & Liabilities, net - (1.4)% | | | (90,802 | ) |
Total Net Assets - 100.0% | | $ | 6,279,991 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
ENERGY FUND | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | �� | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 6,260,855 | | | $ | — | | | $ | — | | | $ | 6,260,855 | |
Repurchase Agreements | | | — | | | | 27,391 | | | | — | | | | 27,391 | |
Securities Lending Collateral | | | 82,547 | | | | — | | | | — | | | | 82,547 | |
Total Assets | | $ | 6,343,402 | | | $ | 27,391 | | | $ | — | | | $ | 6,370,793 | |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $80,316 of securities loaned (cost $5,928,523) | | $ | 6,343,402 | |
Repurchase agreements, at value (cost $27,391) | | | 27,391 | |
Cash | | | 21,960 | |
Receivables: |
Securities sold | | | 4,925,219 | |
Fund shares sold | | | 46,708 | |
Dividends | | | 22,840 | |
Securities lending income | | | 85 | |
Total assets | | | 11,387,605 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 5,002,464 | |
Return of securities lending collateral | | | 82,547 | |
Management fees | | | 5,946 | |
Transfer agent and administrative fees | | | 2,504 | |
Distribution and service fees | | | 789 | |
Portfolio accounting fees | | | 699 | |
Trustees’ fees* | | | 193 | |
Miscellaneous | | | 12,472 | |
Total liabilities | | | 5,107,614 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 6,279,991 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 37,979,045 | |
Total distributable earnings (loss) | | | (31,699,054 | ) |
Net assets | | $ | 6,279,991 | |
| | | | | |
Investor Class: |
Net assets | | $ | 4,216,209 | |
Capital shares outstanding | | | 154,738 | |
Net asset value per share | | $ | 27.25 | |
| | | | | |
A-Class: |
Net assets | | $ | 985,265 | |
Capital shares outstanding | | | 38,885 | |
Net asset value per share | | $ | 25.34 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 26.60 | |
| | | | | |
C-Class: |
Net assets | | $ | 432,495 | |
Capital shares outstanding | | | 19,579 | |
Net asset value per share | | $ | 22.09 | |
| | | | | |
H-Class: |
Net assets | | $ | 646,022 | |
Capital shares outstanding | | | 26,330 | |
Net asset value per share | | $ | 24.54 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $7,284) | | $ | 570,112 | |
Interest | | | 1,726 | |
Income from securities lending, net | | | 554 | |
Total investment income | | | 572,392 | |
| | | | | |
Expenses: |
Management fees | | | 154,896 | |
Distribution and service fees: |
A-Class | | | 5,865 | |
C-Class | | | 11,118 | |
H-Class | | | 2,617 | |
Transfer agent and administrative fees | | | 46,313 | |
Portfolio accounting fees | | | 18,223 | |
Registration fees | | | 17,884 | |
Professional fees | | | 6,129 | |
Trustees’ fees* | | | 4,349 | |
Custodian fees | | | 2,794 | |
Line of credit fees | | | 132 | |
Miscellaneous | | | 18,324 | |
Total expenses | | | 288,644 | |
Net investment income | | | 283,748 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (9,339,262 | ) |
Net realized loss | | | (9,339,262 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (1,785,606 | ) |
Net change in unrealized appreciation (depreciation) | | | (1,785,606 | ) |
Net realized and unrealized loss | | | (11,124,868 | ) |
Net decrease in net assets resulting from operations | | $ | (10,841,120 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 283,748 | | | $ | 148,597 | |
Net realized loss on investments | | | (9,339,262 | ) | | | (9,602,012 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (1,785,606 | ) | | | 336,517 | |
Net decrease in net assets resulting from operations | | | (10,841,120 | ) | | | (9,116,898 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (106,562 | ) | | | (247,372 | ) |
A-Class | | | (19,401 | ) | | | (26,067 | ) |
C-Class | | | (9,575 | ) | | | (17,550 | ) |
H-Class | | | (13,058 | ) | | | (6,251 | ) |
Total distributions to shareholders | | | (148,596 | ) | | | (297,240 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 47,410,108 | | | | 155,653,200 | |
A-Class | | | 1,055,200 | | | | 5,378,833 | |
C-Class | | | 1,008,571 | | | | 1,958,179 | |
H-Class | | | 36,112,670 | | | | 88,531,263 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 104,747 | | | | 245,486 | |
A-Class | | | 18,695 | | | | 25,507 | |
C-Class | | | 9,210 | | | | 17,124 | |
H-Class | | | 12,847 | | | | 6,251 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (51,362,661 | ) | | | (168,124,848 | ) |
A-Class | | | (1,906,514 | ) | | | (4,690,758 | ) |
C-Class | | | (1,541,437 | ) | | | (3,921,283 | ) |
H-Class | | | (35,653,612 | ) | | | (89,229,010 | ) |
Net decrease from capital share transactions | | | (4,732,176 | ) | | | (14,150,056 | ) |
Net decrease in net assets | | | (15,721,892 | ) | | | (23,564,194 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 22,001,883 | | | | 45,566,077 | |
End of year | | $ | 6,279,991 | | | $ | 22,001,883 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 1,046,777 | | | | 1,891,436 | |
A-Class | | | 18,724 | | | | 74,180 | |
C-Class | | | 21,951 | | | | 29,583 | |
H-Class | | | 672,358 | | | | 1,229,643 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 1,810 | | | | 3,804 | |
A-Class | | | 347 | | | | 423 | |
C-Class | | | 196 | | | | 322 | |
H-Class | | | 246 | | | | 107 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (1,131,664 | ) | | | (2,158,043 | ) |
A-Class | | | (33,297 | ) | | | (66,186 | ) |
C-Class | | | (31,899 | ) | | | (60,832 | ) |
H-Class | | | (659,678 | ) | | | (1,238,272 | ) |
Net decrease in shares | | | (94,129 | ) | | | (293,835 | ) |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 68.00 | | | $ | 74.41 | | | $ | 78.73 | | | $ | 66.61 | | | $ | 92.98 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .97 | | | | .35 | | | | .61 | | | | .40 | | | | 1.12 | |
Net gain (loss) on investments (realized and unrealized) | | | (41.24 | ) | | | (6.29 | ) | | | (4.37 | ) | | | 12.24 | | | | (26.37 | ) |
Total from investment operations | | | (40.27 | ) | | | (5.94 | ) | | | (3.76 | ) | | | 12.64 | | | | (25.25 | ) |
Less distributions from: |
Net investment income | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (.52 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (.60 | ) |
Total distributions | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (1.12 | ) |
Net asset value, end of period | | $ | 27.25 | | | $ | 68.00 | | | $ | 74.41 | | | $ | 78.73 | | | $ | 66.61 | |
|
Total Return | | | (59.61 | %) | | | (7.94 | %) | | | (4.78 | %) | | | 18.99 | % | | | (27.30 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 4,216 | | | $ | 16,172 | | | $ | 37,253 | | | $ | 24,284 | | | $ | 22,216 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.65 | % | | | 0.46 | % | | | 0.82 | % | | | 0.52 | % | | | 1.38 | % |
Total expenses | | | 1.48 | % | | | 1.46 | % | | | 1.37 | % | | | 1.37 | % | | | 1.35 | % |
Portfolio turnover rate | | | 428 | % | | | 525 | % | | | 954 | % | | | 996 | % | | | 595 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 63.43 | | | $ | 69.61 | | | $ | 73.86 | | | $ | 62.67 | | | $ | 87.76 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .82 | | | | .21 | | | | .54 | | | | .23 | | | | .76 | |
Net gain (loss) on investments (realized and unrealized) | | | (38.43 | ) | | | (5.92 | ) | | | (4.23 | ) | | | 11.48 | | | | (24.73 | ) |
Total from investment operations | | | (37.61 | ) | | | (5.71 | ) | | | (3.69 | ) | | | 11.71 | | | | (23.97 | ) |
Less distributions from: |
Net investment income | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (.52 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (.60 | ) |
Total distributions | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (1.12 | ) |
Net asset value, end of period | | $ | 25.34 | | | $ | 63.43 | | | $ | 69.61 | | | $ | 73.86 | | | $ | 62.67 | |
|
Total Returnb | | | (59.69 | %) | | | (8.16 | %) | | | (4.99 | %) | | | 18.65 | % | | | (27.46 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 985 | | | $ | 3,369 | | | $ | 3,111 | | | $ | 4,980 | | | $ | 6,274 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.50 | % | | | 0.33 | % | | | 0.78 | % | | | 0.31 | % | | | 1.02 | % |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.60 | % |
Portfolio turnover rate | | | 428 | % | | | 525 | % | | | 954 | % | | | 996 | % | | | 595 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 55.80 | | | $ | 61.76 | | | $ | 66.10 | | | $ | 56.55 | | | $ | 79.93 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .36 | | | | (.36 | ) | | | (.01 | ) | | | (.29 | ) | | | .08 | |
Net gain (loss) on investments (realized and unrealized) | | | (33.59 | ) | | | (5.13 | ) | | | (3.77 | ) | | | 10.36 | | | | (22.34 | ) |
Total from investment operations | | | (33.23 | ) | | | (5.49 | ) | | | (3.78 | ) | | | 10.07 | | | | (22.26 | ) |
Less distributions from: |
Net investment income | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (.52 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (.60 | ) |
Total distributions | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (1.12 | ) |
Net asset value, end of period | | $ | 22.09 | | | $ | 55.80 | | | $ | 61.76 | | | $ | 66.10 | | | $ | 56.55 | |
|
Total Returnb | | | (60.01 | %) | | | (8.83 | %) | | | (5.73 | %) | | | 17.76 | % | | | (28.01 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 432 | | | $ | 1,637 | | | $ | 3,721 | | | $ | 4,331 | | | $ | 4,198 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.76 | % | | | (0.56 | %) | | | (0.02 | %) | | | (0.45 | %) | | | 0.15 | % |
Total expenses | | | 2.48 | % | | | 2.45 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 428 | % | | | 525 | % | | | 954 | % | | | 996 | % | | | 595 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c,d | |
Per Share Data |
Net asset value, beginning of period | | $ | 61.50 | | | $ | 67.51 | | | $ | 71.68 | | | $ | 60.90 | | | $ | 85.36 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .64 | | | | .40 | | | | .99 | | | | .02 | | | | .40 | |
Net gain (loss) on investments (realized and unrealized) | | | (37.12 | ) | | | (5.94 | ) | | | (4.60 | ) | | | 11.28 | | | | (23.74 | ) |
Total from investment operations | | | (36.48 | ) | | | (5.54 | ) | | | (3.61 | ) | | | 11.30 | | | | (23.34 | ) |
Less distributions from: |
Net investment income | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (.52 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (.60 | ) |
Total distributions | | | (.48 | ) | | | (.47 | ) | | | (.56 | ) | | | (.52 | ) | | | (1.12 | ) |
Net asset value, end of period | | $ | 24.54 | | | $ | 61.50 | | | $ | 67.51 | | | $ | 71.68 | | | $ | 60.90 | |
|
Total Return | | | (59.73 | %) | | | (8.16 | %) | | | (5.03 | %) | | | 18.57 | % | | | (27.53 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 646 | | | $ | 824 | | | $ | 1,480 | | | $ | 2,556 | | | $ | 2,795 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.25 | % | | | 0.54 | % | | | 1.50 | % | | | 0.03 | % | | | 0.55 | % |
Total expenses | | | 1.72 | % | | | 1.70 | % | | | 1.63 | % | | | 1.63 | % | | | 1.70 | % |
Portfolio turnover rate | | | 428 | % | | | 525 | % | | | 954 | % | | | 996 | % | | | 595 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Reverse share split — Per share amounts for the periods presented through March 31, 2017 have been restated to reflect a 1:4 reverse share split effective November 7, 2016. |
d | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights prior to that date reflect the performance of the former Advisor Class. |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
ENERGY SERVICES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the energy services field, including those that provide services and equipment in the areas of oil, coal, and gas exploration and production (“Energy Services Companies”).
For the one-year period ended March 31, 2020, Energy Services Fund Investor Class returned -73.21%, compared with -52.42% for the S&P 500 Energy Index. The broader S&P 500 Index returned -6.98%.
All industries detracted from return, led by oil & gas equipment & services and oil & gas drilling.
National Asset Recovery Corp. was the only holding to contribute to the Fund’s return for the period. Schlumberger Ltd., Baker Hughes Co., and Halliburton Co. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | March 30, 2001 |
H-Class | April 2, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Schlumberger Ltd. | 16.0% |
Baker Hughes Co. | 13.3% |
National Oilwell Varco, Inc. | 7.5% |
Halliburton Co. | 4.7% |
Tenaris S.A. ADR | 4.4% |
Helmerich & Payne, Inc. | 4.3% |
TechnipFMC plc | 4.1% |
SEACOR Holdings, Inc. | 3.9% |
Dril-Quip, Inc. | 3.8% |
Cactus, Inc. — Class A | 3.5% |
Top Ten Total | 65.5% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 59 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (73.21%) | (33.18%) | (18.94%) |
A-Class Shares | (73.26%) | (33.34%) | (19.14%) |
A-Class Shares with sales charge‡ | (74.53%) | (33.98%) | (19.53%) |
C-Class Shares | (73.46%) | (33.83%) | (19.74%) |
C-Class Shares with CDSC§ | (73.72%) | (33.83%) | (19.74%) |
H-Class Shares** | (73.19%) | (33.34%) | (19.25%) |
S&P 500 Energy Index | (52.42%) | (14.22%) | (3.75%) |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Energy Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
60 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
ENERGY SERVICES FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.1% |
| | | | | | | | | |
Oil & Gas Services - 75.3% |
Schlumberger Ltd. | | | 28,696 | | | $ | 387,109 | |
Baker Hughes Co. | | | 30,684 | | | | 322,182 | |
National Oilwell Varco, Inc. | | | 18,499 | | | | 181,845 | |
Halliburton Co. | | | 16,472 | | | | 112,833 | |
TechnipFMC plc | | | 14,557 | | | | 98,114 | |
Dril-Quip, Inc.* | | | 2,988 | | | | 91,134 | |
Archrock, Inc. | | | 19,580 | | | | 73,621 | |
RPC, Inc.1 | | | 32,229 | | | | 66,392 | |
DMC Global, Inc. | | | 2,792 | | | | 64,244 | |
Matrix Service Co.* | | | 5,294 | | | | 50,134 | |
Solaris Oilfield Infrastructure, Inc. — Class A | | | 8,890 | | | | 46,672 | |
Core Laboratories N.V. | | | 4,393 | | | | 45,424 | |
Liberty Oilfield Services, Inc. — Class A | | | 15,891 | | | | 42,747 | |
Apergy Corp.*,1 | | | 7,424 | | | | 42,688 | |
ProPetro Holding Corp.* | | | 14,958 | | | | 37,395 | |
Oceaneering International, Inc.* | | | 12,667 | | | | 37,241 | |
US Silica Holdings, Inc. | | | 18,142 | | | | 32,656 | |
NexTier Oilfield Solutions, Inc.* | | | 27,688 | | | | 32,395 | |
Helix Energy Solutions Group, Inc.* | | | 19,567 | | | | 32,090 | |
Oil States International, Inc.* | | | 9,325 | | | | 18,930 | |
Total Oil & Gas Services | | | | | | | 1,815,846 | |
| | | | | | | | | |
Oil & Gas - 10.0% |
Helmerich & Payne, Inc. | | | 6,581 | | | | 102,993 | |
Patterson-UTI Energy, Inc. | | | 21,726 | | | | 51,056 | |
Transocean Ltd.* | | | 41,045 | | | | 47,612 | |
Diamond Offshore Drilling, Inc.* | | | 22,151 | | | | 40,536 | |
Total Oil & Gas | | | | | | | 242,197 | |
| | | | | | | | | |
Transportation - 5.9% |
SEACOR Holdings, Inc.* | | | 3,449 | | | | 92,985 | |
Tidewater, Inc.* | | | 7,056 | | | | 49,956 | |
Total Transportation | | | | | | | 142,941 | |
| | | | | | | | | |
Metal Fabricate & Hardware - 4.4% |
Tenaris S.A. ADR | | | 8,811 | | | | 106,173 | |
| | | | | | | | | |
Machinery-Diversified - 3.5% |
Cactus, Inc. — Class A | | | 7,294 | | | | 84,610 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $4,470,017) | | | | | | | 2,391,767 | |
| | | Face
Amount | | | | |
| REPURCHASE AGREEMENTS††,2 - 0.8% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 14,588 | | | | 14,588 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 5,611 | | | | 5,611 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $20,199) | | | | | | | 20,199 | |
| | | | | | | | | |
| | | | Shares | | | | | |
| SECURITIES LENDING COLLATERAL†,3 - 3.2% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 76,274 | | | | 76,274 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $76,274) | | | | | | | 76,274 | |
| | | | | | | | | |
| Total Investments - 103.1% | | | | | | | | |
| (Cost $4,566,490) | | | | | | $ | 2,488,240 | |
| Other Assets & Liabilities, net - (3.1)% | | | | | | | (74,783 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 2,413,457 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
ENERGY SERVICES FUND | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 2,391,767 | | | $ | — | | | $ | — | | | $ | 2,391,767 | |
Repurchase Agreements | | | — | | | | 20,199 | | | | — | | | | 20,199 | |
Securities Lending Collateral | | | 76,274 | | | | — | | | | — | | | | 76,274 | |
Total Assets | | $ | 2,468,041 | | | $ | 20,199 | | | $ | — | | | $ | 2,488,240 | |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $71,231 of securities loaned (cost $4,546,291) | | $ | 2,468,041 | |
Repurchase agreements, at value (cost $20,199) | | | 20,199 | |
Cash | | | 16,194 | |
Receivables: |
Fund shares sold | | | 30,842 | |
Dividends | | | 15,438 | |
Securities lending income | | | 216 | |
Total assets | | | 2,550,930 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 76,274 | |
Fund shares redeemed | | | 52,863 | |
Management fees | | | 2,132 | |
Transfer agent and administrative fees | | | 879 | |
Distribution and service fees | | | 350 | |
Portfolio accounting fees | | | 251 | |
Trustees’ fees* | | | 72 | |
Miscellaneous | | | 4,652 | |
Total liabilities | | | 137,473 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 2,413,457 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 40,112,562 | |
Total distributable earnings (loss) | | | (37,699,105 | ) |
Net assets | | $ | 2,413,457 | |
| | | | | |
Investor Class: |
Net assets | | $ | 1,502,480 | |
Capital shares outstanding | | | 298,506 | |
Net asset value per share | | $ | 5.03 | |
| | | | | |
A-Class: |
Net assets | | $ | 191,039 | |
Capital shares outstanding | | | 40,643 | |
Net asset value per share | | $ | 4.70 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 4.93 | |
| | | | | |
C-Class: |
Net assets | | $ | 192,400 | |
Capital shares outstanding | | | 46,486 | |
Net asset value per share | | $ | 4.14 | |
| | | | | |
H-Class: |
Net assets | | $ | 527,538 | |
Capital shares outstanding | | | 115,746 | |
Net asset value per share | | $ | 4.56 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1,716) | | $ | 222,210 | |
Interest | | | 956 | |
Income from securities lending, net | | | 657 | |
Total investment income | | | 223,823 | |
| | | | | |
Expenses: |
Management fees | | | 73,713 | |
Distribution and service fees: |
A-Class | | | 1,507 | |
C-Class | | | 5,764 | |
H-Class | | | 3,708 | |
Transfer agent and administrative fees | | | 21,933 | |
Registration fees | | | 8,857 | |
Portfolio accounting fees | | | 8,672 | |
Professional fees | | | 3,219 | |
Trustees’ fees* | | | 2,399 | |
Custodian fees | | | 1,459 | |
Line of credit fees | | | 211 | |
Miscellaneous | | | 7,559 | |
Total expenses | | | 139,001 | |
Net investment income | | | 84,822 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (4,960,531 | ) |
Net realized loss | | | (4,960,531 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (3,553,608 | ) |
Net change in unrealized appreciation (depreciation) | | | (3,553,608 | ) |
Net realized and unrealized loss | | | (8,514,139 | ) |
Net decrease in net assets resulting from operations | | $ | (8,429,317 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 84,822 | | | $ | 8,235 | |
Net realized loss on investments | | | (4,960,531 | ) | | | (9,567,766 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (3,553,608 | ) | | | 150,990 | |
Net decrease in net assets resulting from operations | | | (8,429,317 | ) | | | (9,408,541 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (5,823 | ) | | | (100,286 | ) |
A-Class | | | (749 | ) | | | (12,025 | ) |
C-Class | | | (806 | ) | | | (12,784 | ) |
H-Class | | | (856 | ) | | | (19,170 | ) |
Total distributions to shareholders | | | (8,234 | ) | | | (144,265 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 46,095,104 | | | | 87,233,777 | |
A-Class | | | 603,109 | | | | 6,191,055 | |
C-Class | | | 778,132 | | | | 1,750,392 | |
H-Class | | | 42,129,255 | | | | 157,012,452 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 5,544 | | | | 97,137 | |
A-Class | | | 737 | | | | 11,808 | |
C-Class | | | 805 | | | | 12,741 | |
H-Class | | | 848 | | | | 19,147 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (45,009,881 | ) | | | (83,475,137 | ) |
A-Class | | | (691,018 | ) | | | (5,678,528 | ) |
C-Class | | | (885,394 | ) | | | (2,469,916 | ) |
H-Class | | | (47,122,584 | ) | | | (162,786,956 | ) |
Net decrease from capital share transactions | | | (4,095,343 | ) | | | (2,082,028 | ) |
Net decrease in net assets | | | (12,532,894 | ) | | | (11,634,834 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 14,946,351 | | | | 26,581,185 | |
End of year | | $ | 2,413,457 | | | $ | 14,946,351 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 3,093,160 | | | | 3,598,503 | |
A-Class | | | 40,459 | | | | 317,922 | |
C-Class | | | 65,538 | | | | 84,483 | |
H-Class | | | 3,087,907 | | | | 6,965,608 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 401 | | | | 5,599 | |
A-Class | | | 57 | | | | 726 | |
C-Class | | | 71 | | | | 882 | |
H-Class | | | 68 | | | | 1,217 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (3,161,898 | ) | | | (3,561,879 | ) |
A-Class | | | (46,995 | ) | | | (305,767 | ) |
C-Class | | | (71,994 | ) | | | (119,081 | ) |
H-Class | | | (3,347,726 | ) | | | (7,278,381 | ) |
Net decrease in shares | | | (340,952 | ) | | | (290,168 | ) |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 18.80 | | | $ | 25.20 | | | $ | 32.24 | | | $ | 28.41 | | | $ | 39.36 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .16 | | | | .01 | | | | .59 | d | | | .01 | | | | .29 | |
Net gain (loss) on investments (realized and unrealized) | | | (13.91 | ) | | | (6.19 | ) | | | (7.38 | ) | | | 4.07 | | | | (10.90 | ) |
Total from investment operations | | | (13.75 | ) | | | (6.18 | ) | | | (6.79 | ) | | | 4.08 | | | | (10.61 | ) |
Less distributions from: |
Net investment income | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Total distributions | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Net asset value, end of period | | $ | 5.03 | | | $ | 18.80 | | | $ | 25.20 | | | $ | 32.24 | | | $ | 28.41 | |
|
Total Return | | | (73.21 | %) | | | (24.43 | %) | | | (21.11 | %) | | | 14.38 | % | | | (27.05 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,502 | | | $ | 6,896 | | | $ | 8,181 | | | $ | 11,757 | | | $ | 9,521 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.11 | % | | | 0.06 | % | | | 2.19 | %e | | | 0.03 | % | | | 0.83 | % |
Total expenses | | | 1.48 | % | | | 1.46 | % | | | 1.38 | % | | | 1.38 | % | | | 1.35 | % |
Portfolio turnover rate | | | 810 | % | | | 1,453 | % | | | 1,824 | % | | | 1,830 | % | | | 1,241 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 17.60 | | | $ | 23.68 | | | $ | 30.39 | | | $ | 26.86 | | | $ | 37.32 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .13 | | | | .12 | | | | .60 | d | | | (.14 | ) | | | .24 | |
Net gain (loss) on investments (realized and unrealized) | | | (13.01 | ) | | | (5.98 | ) | | | (7.06 | ) | | | 3.92 | | | | (10.36 | ) |
Total from investment operations | | | (12.88 | ) | | | (5.86 | ) | | | (6.46 | ) | | | 3.78 | | | | (10.12 | ) |
Less distributions from: |
Net investment income | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Total distributions | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Net asset value, end of period | | $ | 4.70 | | | $ | 17.60 | | | $ | 23.68 | | | $ | 30.39 | | | $ | 26.86 | |
|
Total Returnb | | | (73.26 | %) | | | (24.65 | %) | | | (21.31 | %) | | | 14.09 | % | | | (27.22 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 191 | | | $ | 829 | | | $ | 811 | | | $ | 1,295 | | | $ | 2,849 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.94 | % | | | 0.60 | % | | | 2.37 | %e | | | (0.47 | %) | | | 0.73 | % |
Total expenses | | | 1.73 | % | | | 1.73 | % | | | 1.63 | % | | | 1.62 | % | | | 1.59 | % |
Portfolio turnover rate | | | 810 | % | | | 1,453 | % | | | 1,824 | % | | | 1,830 | % | | | 1,241 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 15.62 | | | $ | 21.20 | | | $ | 27.44 | | | $ | 24.46 | | | $ | 34.28 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .02 | | | | (.17 | ) | | | .38 | d | | | (.33 | ) | | | (.05 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (11.48 | ) | | | (5.19 | ) | | | (6.37 | ) | | | 3.56 | | | | (9.43 | ) |
Total from investment operations | | | (11.46 | ) | | | (5.36 | ) | | | (5.99 | ) | | | 3.23 | | | | (9.48 | ) |
Less distributions from: |
Net investment income | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Total distributions | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Net asset value, end of period | | $ | 4.14 | | | $ | 15.62 | | | $ | 21.20 | | | $ | 27.44 | | | $ | 24.46 | |
|
Total Returnb | | | (73.46 | %) | | | (25.17 | %) | | | (21.89 | %) | | | 13.22 | % | | | (27.76 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 192 | | | $ | 826 | | | $ | 1,836 | | | $ | 3,258 | | | $ | 2,544 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.20 | % | | | (0.84 | %) | | | 1.66 | %e | | | (1.23 | %) | | | (0.16 | %) |
Total expenses | | | 2.48 | % | | | 2.45 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 810 | % | | | 1,453 | % | | | 1,824 | % | | | 1,830 | % | | | 1,241 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 17.03 | | | $ | 22.93 | | | $ | 29.47 | | | $ | 26.07 | | | $ | 36.29 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .11 | | | | .03 | | | | .19 | d | | | (.08 | ) | | | .05 | |
Net gain (loss) on investments (realized and unrealized) | | | (12.56 | ) | | | (5.71 | ) | | | (6.48 | ) | | | 3.73 | | | | (9.93 | ) |
Total from investment operations | | | (12.45 | ) | | | (5.68 | ) | | | (6.29 | ) | | | 3.65 | | | | (9.88 | ) |
Less distributions from: |
Net investment income | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Total distributions | | | (.02 | ) | | | (.22 | ) | | | (.25 | ) | | | (.25 | ) | | | (.34 | ) |
Net asset value, end of period | | $ | 4.56 | | | $ | 17.03 | | | $ | 22.93 | | | $ | 29.47 | | | $ | 26.07 | |
|
Total Return | | | (73.19 | %) | | | (24.67 | %) | | | (21.40 | %) | | | 14.02 | % | | | (27.31 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 528 | | | $ | 6,395 | | | $ | 15,754 | | | $ | 4,193 | | | $ | 1,700 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.77 | % | | | 0.15 | % | | | 0.76 | %e | | | (0.29 | %) | | | 0.15 | % |
Total expenses | | | 1.72 | % | | | 1.70 | % | | | 1.63 | % | | | 1.62 | % | | | 1.67 | % |
Portfolio turnover rate | | | 810 | % | | | 1,453 | % | | | 1,824 | % | | | 1,830 | % | | | 1,241 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
d | Net investments income per share includes $0.54, $0.50, $0.45, and $0.50 for Investor Class, A-Class, C-Class, and H-Class, respectively resulting from a special dividend from Baker Hughes, a GE Co., LLC on July 05, 2017. |
e | Net investment income to average net assets includes 1.99% from Investor Class, A-Class, C-Class, and H-Class, resulting from a special dividend from Baker Hughes, a GE Co., LLC on July 05, 2017. |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
FINANCIAL SERVICES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the financial services sector (“Financial Services Companies”).
For the one-year period ended March 31, 2020, Financial Services Fund Investor Class returned -19.88%, compared with -17.15% for the S&P 500 Financials Index. The broader S&P 500 Index returned -6.98%.
Financial exchanges & data contributed the most to return, followed by industrial REITs. Regional banks, diversified banks, and retail REITs detracted the most from return.
Equinix, Inc., MSCI, Inc. – Class A, and Prologis, Inc. contributed the most to the Fund’s return for the period. Simon Property Group, Inc., Wells Fargo & Co., and Citigroup, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 2, 1998 |
A-Class | September 1, 2004 |
C-Class | April 19, 2001 |
H-Class | April 6, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Berkshire Hathaway, Inc. — Class B | 3.8% |
JPMorgan Chase & Co. | 2.7% |
Bank of America Corp. | 2.2% |
American Tower Corp. — Class A | 1.9% |
Wells Fargo & Co. | 1.6% |
Crown Castle International Corp. | 1.6% |
Equinix, Inc. | 1.5% |
BlackRock, Inc. — Class A | 1.5% |
S&P Global, Inc. | 1.5% |
CME Group, Inc. — Class A | 1.4% |
Top Ten Total | 19.7% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 67 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (19.88%) | 0.41% | 4.89% |
A-Class Shares | (20.07%) | 0.15% | 4.63% |
A-Class Shares with sales charge‡ | (23.87%) | (0.82%) | 4.12% |
C-Class Shares | (20.66%) | (0.59%) | 3.86% |
C-Class Shares with CDSC§ | (21.45%) | (0.59%) | 3.86% |
H-Class Shares** | (20.08%) | 0.14% | 4.49% |
S&P 500 Financials Index | (17.15%) | 3.37% | 6.89% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Financials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
68 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
FINANCIAL SERVICES FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.5% |
| | | | | | | | | |
REITs - 30.1% |
American Tower Corp. — Class A | | | 873 | | | $ | 190,096 | |
Crown Castle International Corp. | | | 1,077 | | | | 155,519 | |
Equinix, Inc. | | | 244 | | | | 152,395 | |
Prologis, Inc. | | | 1,696 | | | | 136,308 | |
Digital Realty Trust, Inc. | | | 842 | | | | 116,962 | |
SBA Communications Corp. | | | 430 | | | | 116,087 | |
Public Storage | | | 571 | | | | 113,406 | |
Equity Residential | | | 1,353 | | | | 83,494 | |
AvalonBay Communities, Inc. | | | 514 | | | | 75,645 | |
Alexandria Real Estate Equities, Inc. | | | 525 | | | | 71,956 | |
Extra Space Storage, Inc. | | | 701 | | | | 67,128 | |
Duke Realty Corp. | | | 2,063 | | | | 66,800 | |
Realty Income Corp. | | | 1,338 | | | | 66,713 | |
Essex Property Trust, Inc. | | | 298 | | | | 65,631 | |
Welltower, Inc. | | | 1,418 | | | | 64,916 | |
Sun Communities, Inc. | | | 496 | | | | 61,926 | |
Boston Properties, Inc. | | | 662 | | | | 61,056 | |
Mid-America Apartment Communities, Inc. | | | 584 | | | | 60,169 | |
Healthpeak Properties, Inc. | | | 2,459 | | | | 58,647 | |
UDR, Inc. | | | 1,587 | | | | 57,989 | |
Invitation Homes, Inc. | | | 2,685 | | | | 57,378 | |
Medical Properties Trust, Inc. | | | 3,160 | | | | 54,636 | |
WP Carey, Inc. | | | 934 | | | | 54,247 | |
Weyerhaeuser Co. | | | 3,134 | | | | 53,121 | |
CyrusOne, Inc. | | | 832 | | | | 51,376 | |
Americold Realty Trust | | | 1,480 | | | | 50,379 | |
American Homes 4 Rent — Class A | | | 2,148 | | | | 49,834 | |
Simon Property Group, Inc. | | | 902 | | | | 49,484 | |
Iron Mountain, Inc. | | | 1,889 | | | | 44,958 | |
VICI Properties, Inc. | | | 2,673 | | | | 44,479 | |
Ventas, Inc. | | | 1,607 | | | | 43,068 | |
Host Hotels & Resorts, Inc. | | | 3,890 | | | | 42,946 | |
CubeSmart | | | 1,558 | | | | 41,739 | |
Regency Centers Corp. | | | 1,026 | | | | 39,429 | |
Gaming and Leisure Properties, Inc. | | | 1,401 | | | | 38,822 | |
Douglas Emmett, Inc. | | | 1,255 | | | | 38,290 | |
Omega Healthcare Investors, Inc. | | | 1,437 | | | | 38,138 | |
Vornado Realty Trust | | | 1,052 | | | | 38,093 | |
Apartment Investment & Management Co. — Class A | | | 1,073 | | | | 37,716 | |
AGNC Investment Corp. | | | 3,481 | | | | 36,829 | |
Cousins Properties, Inc. | | | 1,195 | | | | 34,978 | |
Lamar Advertising Co. — Class A | | | 666 | | | | 34,152 | |
STAG Industrial, Inc. | | | 1,307 | | | | 29,434 | |
STORE Capital Corp. | | | 1,585 | | | | 28,720 | |
Kimco Realty Corp. | | | 2,855 | | | | 27,608 | |
SL Green Realty Corp. | | | 593 | | | | 25,558 | |
Brixmor Property Group, Inc. | | | 2,338 | | | | 22,211 | |
Sabra Health Care REIT, Inc. | | | 1,931 | | | | 21,087 | |
Park Hotels & Resorts, Inc. | | | 1,914 | | | | 15,140 | |
Macerich Co. | | | 1,421 | | | | 8,000 | |
Total REITs | | | | | | | 2,994,693 | |
| | | | | | | | | |
Banks - 24.1% |
JPMorgan Chase & Co. | | | 3,016 | | | | 271,530 | |
Bank of America Corp. | | | 10,129 | | | | 215,039 | |
Wells Fargo & Co. | | | 5,594 | | | | 160,548 | |
Citigroup, Inc. | | | 3,322 | | | | 139,923 | |
Goldman Sachs Group, Inc. | | | 797 | | | | 123,208 | |
Morgan Stanley | | | 3,548 | | | | 120,632 | |
U.S. Bancorp | | | 3,218 | | | | 110,860 | |
PNC Financial Services Group, Inc. | | | 1,047 | | | | 100,219 | |
Truist Financial Corp. | | | 3,080 | | | | 94,987 | |
Bank of New York Mellon Corp. | | | 2,691 | | | | 90,633 | |
State Street Corp. | | | 1,351 | | | | 71,968 | |
Northern Trust Corp. | | | 886 | | | | 66,857 | |
First Republic Bank | | | 748 | | | | 61,545 | |
M&T Bank Corp. | | | 556 | | | | 57,507 | |
HSBC Holdings plc ADR | | | 1,850 | | | | 51,818 | |
HDFC Bank Ltd. ADR | | | 1,201 | | | | 46,190 | |
KeyCorp | | | 4,407 | | | | 45,701 | |
Fifth Third Bancorp | | | 3,022 | | | | 44,877 | |
ICICI Bank Ltd. ADR | | | 5,068 | | | | 43,078 | |
SVB Financial Group* | | | 284 | | | | 42,907 | |
Huntington Bancshares, Inc. | | | 5,222 | | | | 42,873 | |
Popular, Inc. | | | 1,207 | | | | 42,245 | |
Regions Financial Corp. | | | 4,708 | | | | 42,231 | |
Commerce Bancshares, Inc. | | | 815 | | | | 41,035 | |
Citizens Financial Group, Inc. | | | 2,071 | | | | 38,955 | |
Signature Bank | | | 402 | | | | 32,317 | |
Zions Bancorp North America | | | 1,148 | | | | 30,720 | |
East West Bancorp, Inc. | | | 1,088 | | | | 28,005 | |
Comerica, Inc. | | | 896 | | | | 26,289 | |
TCF Financial Corp. | | | 1,136 | | | | 25,742 | |
First Horizon National Corp. | | | 2,714 | | | | 21,875 | |
Synovus Financial Corp. | | | 1,240 | | | | 21,774 | |
PacWest Bancorp | | | 1,099 | | | | 19,694 | |
Wintrust Financial Corp. | | | 566 | | | | 18,599 | |
Texas Capital Bancshares, Inc.* | | | 580 | | | | 12,859 | |
Total Banks | | | | | | | 2,405,240 | |
| | | | | | | | | |
Insurance - 21.9% |
Berkshire Hathaway, Inc. — Class B* | | | 2,071 | | | | 378,641 | |
Progressive Corp. | | | 1,804 | | | | 133,207 | |
Marsh & McLennan Companies, Inc. | | | 1,334 | | | | 115,338 | |
Chubb Ltd. | | | 892 | | | | 99,628 | |
Allstate Corp. | | | 1,070 | | | | 98,151 | |
Willis Towers Watson plc | | | 516 | | | | 87,643 | |
Travelers Companies, Inc. | | | 867 | | | | 86,137 | |
MetLife, Inc. | | | 2,693 | | | | 82,325 | |
Aflac, Inc. | | | 2,343 | | | | 80,224 | |
Arthur J Gallagher & Co. | | | 875 | | | | 71,321 | |
Prudential Financial, Inc. | | | 1,308 | | | | 68,199 | |
Aon plc | | | 393 | | | | 64,861 | |
American International Group, Inc. | | | 2,580 | | | | 62,565 | |
Brown & Brown, Inc. | | | 1,681 | | | | 60,886 | |
Cincinnati Financial Corp. | | | 785 | | | | 59,228 | |
Arch Capital Group Ltd.* | | | 2,057 | | | | 58,542 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
FINANCIAL SERVICES FUND | |
| | Shares | | | Value | |
Hartford Financial Services Group, Inc. | | | 1,539 | | | $ | 54,234 | |
Loews Corp. | | | 1,523 | | | | 53,046 | |
Erie Indemnity Co. — Class A | | | 353 | | | | 52,329 | |
Everest Re Group Ltd. | | | 255 | | | | 49,067 | |
Principal Financial Group, Inc. | | | 1,411 | | | | 44,221 | |
Assurant, Inc. | | | 424 | | | | 44,134 | |
eHealth, Inc.* | | | 304 | | | | 42,809 | |
Equitable Holdings, Inc. | | | 2,694 | | | | 38,928 | |
Fidelity National Financial, Inc. | | | 1,560 | | | | 38,813 | |
Voya Financial, Inc. | | | 929 | | | | 37,671 | |
Athene Holding Ltd. — Class A* | | | 1,478 | | | | 36,684 | |
Lincoln National Corp. | | | 1,149 | | | | 30,242 | |
Unum Group | | | 1,675 | | | | 25,142 | |
Brighthouse Financial, Inc.* | | | 1,014 | | | | 24,508 | |
Total Insurance | | | | | | | 2,178,724 | |
| | | | | | | | | |
Diversified Financial Services - 14.4% |
BlackRock, Inc. — Class A | | | 346 | | | | 152,230 | |
CME Group, Inc. — Class A | | | 825 | | | | 142,651 | |
American Express Co. | | | 1,613 | | | | 138,089 | |
Intercontinental Exchange, Inc. | | | 1,521 | | | | 122,821 | |
Charles Schwab Corp. | | | 3,265 | | | | 109,769 | |
T. Rowe Price Group, Inc. | | | 866 | | | | 84,565 | |
Nasdaq, Inc. | | | 775 | | | | 73,586 | |
TD Ameritrade Holding Corp. | | | 2,086 | | | | 72,301 | |
Capital One Financial Corp. | | | 1,346 | | | | 67,865 | |
Ameriprise Financial, Inc. | | | 538 | | | | 55,134 | |
Cboe Global Markets, Inc. | | | 609 | | | | 54,353 | |
Raymond James Financial, Inc. | | | 781 | | | | 49,359 | |
E*TRADE Financial Corp. | | | 1,391 | | | | 47,739 | |
Franklin Resources, Inc. | | | 2,748 | | | | 45,864 | |
SEI Investments Co. | | | 942 | | | | 43,652 | |
Synchrony Financial | | | 2,663 | | | | 42,848 | |
Discover Financial Services | | | 1,198 | | | | 42,733 | |
LPL Financial Holdings, Inc. | | | 583 | | | | 31,733 | |
Ally Financial, Inc. | | | 2,197 | | | | 31,703 | |
Invesco Ltd. | | | 3,115 | | | | 28,284 | |
Total Diversified Financial Services | | | | | | | 1,437,279 | |
| | | | | | | | | |
Private Equity - 3.3% |
Blackstone Group, Inc. — Class A | | | 2,890 | | | | 131,697 | |
KKR & Company, Inc. — Class A | | | 3,331 | | | | 78,179 | |
Apollo Global Management, Inc. | | | 1,890 | | | | 63,315 | |
Brookfield Asset Management, Inc. — Class A | | | 1,241 | | | | 54,914 | |
Total Private Equity | | | | | | | 328,105 | |
| | | | | | | | | |
Commercial Services - 3.3% |
S&P Global, Inc. | | | 591 | | | | 144,825 | |
Moody’s Corp. | | | 555 | | | | 117,382 | |
MarketAxess Holdings, Inc. | | | 198 | | | | 65,849 | |
Total Commercial Services | | | | | | | 328,056 | |
| | | | | | | | | |
Software - 1.1% |
MSCI, Inc. — Class A | | | 360 | | | | 104,026 | |
| | | | | | | | | |
Savings & Loans - 0.7% |
New York Community Bancorp, Inc. | | | 3,938 | | | | 36,978 | |
People’s United Financial, Inc. | | | 3,232 | | | | 35,713 | |
Total Savings & Loans | | | | | | | 72,691 | |
| | | | | | | | | |
Media - 0.6% |
FactSet Research Systems, Inc. | | | 236 | | | | 61,520 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $9,332,906) | | | | | | | 9,910,334 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,1 - 0.6% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 44,782 | | | | 44,782 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 17,224 | | | | 17,224 | |
Total Repurchase Agreements | | | | |
(Cost $62,006) | | | | | | | 62,006 | |
| | | | | | | | | |
Total Investments - 100.1% | | | | |
(Cost $9,394,912) | | $ | 9,972,340 | |
Other Assets & Liabilities, net - (0.1)% | | | (10,125 | ) |
Total Net Assets - 100.0% | | $ | 9,962,215 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
FINANCIAL SERVICES FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 9,910,334 | | | $ | — | | | $ | — | | | $ | 9,910,334 | |
Repurchase Agreements | | | — | | | | 62,006 | | | | — | | | | 62,006 | |
Total Assets | | $ | 9,910,334 | | | $ | 62,006 | | | $ | — | | | $ | 9,972,340 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value (cost $9,332,906) | | $ | 9,910,334 | |
Repurchase agreements, at value (cost $62,006) | | | 62,006 | |
Cash | | | 50,011 | |
Receivables: |
Fund shares sold | | | 114,060 | |
Dividends | | | 25,396 | |
Foreign tax reclaims | | | 295 | |
Securities lending income | | | 6 | |
Total assets | | | 10,162,108 | |
| | | | | |
Liabilities: |
Payable for: |
Securities purchased | | | 124,302 | |
Fund shares redeemed | | | 42,238 | |
Management fees | | | 8,336 | |
Transfer agent and administrative fees | | | 3,330 | |
Distribution and service fees | | | 1,985 | |
Portfolio accounting fees | | | 981 | |
Trustees’ fees* | | | 284 | |
Miscellaneous | | | 18,437 | |
Total liabilities | | | 199,893 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 9,962,215 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 10,594,433 | |
Total distributable earnings (loss) | | | (632,218 | ) |
Net assets | | $ | 9,962,215 | |
| | | | | |
Investor Class: |
Net assets | | $ | 2,968,290 | |
Capital shares outstanding | | | 54,166 | |
Net asset value per share | | $ | 54.80 | |
| | | | | |
A-Class: |
Net assets | | $ | 5,744,973 | |
Capital shares outstanding | | | 112,417 | |
Net asset value per share | | $ | 51.10 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 53.65 | |
| | | | | |
C-Class: |
Net assets | | $ | 638,020 | |
Capital shares outstanding | | | 14,310 | |
Net asset value per share | | $ | 44.59 | |
| | | | | |
H-Class: |
Net assets | | $ | 610,932 | |
Capital shares outstanding | | | 12,334 | |
Net asset value per share | | $ | 49.53 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1,375) | | $ | 623,115 | |
Interest | | | 2,586 | |
Income from securities lending, net | | | 53 | |
Total investment income | | | 625,754 | |
| | | | | |
Expenses: |
Management fees | | | 208,075 | |
Distribution and service fees: |
A-Class | | | 19,779 | |
C-Class | | | 9,693 | |
H-Class | | | 9,901 | |
Transfer agent and administrative fees | | | 62,076 | |
Portfolio accounting fees | | | 24,479 | |
Registration fees | | | 23,056 | |
Professional fees | | | 12,263 | |
Trustees’ fees* | | | 5,850 | |
Custodian fees | | | 3,630 | |
Line of credit fees | | | 34 | |
Miscellaneous | | | 22,008 | |
Total expenses | | | 400,844 | |
Net investment income | | | 224,910 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 967,033 | |
Net realized gain | | | 967,033 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (3,396,384 | ) |
Net change in unrealized appreciation (depreciation) | | | (3,396,384 | ) |
Net realized and unrealized loss | | | (2,429,351 | ) |
Net decrease in net assets resulting from operations | | $ | (2,204,441 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 224,910 | | | $ | 177,282 | |
Net realized gain on investments | | | 967,033 | | | | 4,257,309 | |
Net change in unrealized appreciation (depreciation) on investments | | | (3,396,384 | ) | | | (3,956,634 | ) |
Net increase (decrease) in net assets resulting from operations | | | (2,204,441 | ) | | | 477,957 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (64,630 | ) | | | (564,622 | ) |
A-Class | | | (36,597 | ) | | | (342,005 | ) |
C-Class | | | (5,315 | ) | | | (70,151 | ) |
H-Class | | | (8,748 | ) | | | (560,062 | ) |
Total distributions to shareholders | | | (115,290 | ) | | | (1,536,840 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 49,827,414 | | | | 65,186,396 | |
A-Class | | | 4,186,426 | | | | 3,561,906 | |
C-Class | | | 1,741,582 | | | | 1,960,408 | |
H-Class | | | 18,267,949 | | | | 77,362,348 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 63,368 | | | | 552,353 | |
A-Class | | | 36,296 | | | | 339,699 | |
C-Class | | | 5,268 | | | | 69,278 | |
H-Class | | | 8,748 | | | | 560,062 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (51,288,443 | ) | | | (84,529,582 | ) |
A-Class | | | (4,716,834 | ) | | | (4,236,390 | ) |
C-Class | | | (1,914,065 | ) | | | (3,184,480 | ) |
H-Class | | | (19,106,628 | ) | | | (80,120,580 | ) |
Net decrease from capital share transactions | | | (2,888,919 | ) | | | (22,478,582 | ) |
Net decrease in net assets | | | (5,208,650 | ) | | | (23,537,465 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 15,170,865 | | | | 38,708,330 | |
End of year | | $ | 9,962,215 | | | $ | 15,170,865 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 673,773 | | | | 904,721 | |
A-Class | | | 61,997 | | | | 54,277 | |
C-Class | | | 28,914 | | | | 32,994 | |
H-Class | | | 274,440 | | | | 1,254,996 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 821 | | | | 8,628 | |
A-Class | | | 504 | | | | 5,669 | |
C-Class | | | 84 | | | | 1,312 | |
H-Class | | | 125 | | | | 9,640 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (692,918 | ) | | | (1,189,781 | ) |
A-Class | | | (68,450 | ) | | | (63,756 | ) |
C-Class | | | (32,121 | ) | | | (53,504 | ) |
H-Class | | | (288,019 | ) | | | (1,284,564 | ) |
Net decrease in shares | | | (40,850 | ) | | | (319,368 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017d | | | Year Ended
March 31,
2016d | |
Per Share Data |
Net asset value, beginning of period | | $ | 68.68 | | | $ | 72.17 | | | $ | 65.14 | | | $ | 53.90 | | | $ | 57.78 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .83 | | | | .53 | | | | .61 | | | | .55 | | | | .77 | |
Net gain (loss) on investments (realized and unrealized) | | | (14.39 | ) | | | (.86 | )f | | | 6.79 | | | | 11.14 | | | | (4.19 | ) |
Total from investment operations | | | (13.56 | ) | | | (.33 | ) | | | 7.40 | | | | 11.69 | | | | (3.42 | ) |
Less distributions from: |
Net investment income | | | (.32 | ) | | | (.89 | ) | | | (.37 | ) | | | (.45 | ) | | | (.30 | ) |
Net realized gains | | | — | | | | (2.27 | ) | | | — | | | | — | | | | (.16 | ) |
Total distributions | | | (.32 | ) | | | (3.16 | ) | | | (.37 | ) | | | (.45 | ) | | | (.46 | ) |
Net asset value, end of period | | $ | 54.80 | | | $ | 68.68 | | | $ | 72.17 | | | $ | 65.14 | | | $ | 53.90 | |
|
Total Return | | | (19.88 | %) | | | (0.14 | %) | | | 11.37 | % | | | 21.72 | % | | | (5.95 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,968 | | | $ | 4,978 | | | $ | 25,183 | | | $ | 39,214 | | | $ | 15,110 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.12 | % | | | 0.74 | % | | | 0.89 | % | | | 0.90 | % | | | 1.36 | % |
Total expenses | | | 1.48 | % | | | 1.45 | % | | | 1.38 | % | | | 1.38 | % | | | 1.34 | % |
Portfolio turnover rate | | | 249 | % | | | 410 | % | | | 347 | % | | | 389 | % | | | 268 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017d | | | Year Ended
March 31,
2016d | |
Per Share Data |
Net asset value, beginning of period | | $ | 64.22 | | | $ | 67.88 | | | $ | 61.44 | | | $ | 51.00 | | | $ | 54.83 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .54 | | | | .37 | | | | .53 | | | | .41 | | | | .46 | |
Net gain (loss) on investments (realized and unrealized) | | | (13.34 | ) | | | (.87 | )f | | | 6.28 | | | | 10.48 | | | | (3.83 | ) |
Total from investment operations | | | (12.80 | ) | | | (.50 | ) | | | 6.81 | | | | 10.89 | | | | (3.37 | ) |
Less distributions from: |
Net investment income | | | (.32 | ) | | | (.89 | ) | | | (.37 | ) | | | (.45 | ) | | | (.30 | ) |
Net realized gains | | | — | | | | (2.27 | ) | | | — | | | | — | | | | (.16 | ) |
Total distributions | | | (.32 | ) | | | (3.16 | ) | | | (.37 | ) | | | (.45 | ) | | | (.46 | ) |
Net asset value, end of period | | $ | 51.10 | | | $ | 64.22 | | | $ | 67.88 | | | $ | 61.44 | | | $ | 51.00 | |
|
Total Returnb | | | (20.07 | %) | | | (0.41 | %) | | | 11.08 | % | | | 21.42 | % | | | (6.17 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 5,745 | | | $ | 7,602 | | | $ | 8,293 | | | $ | 1,834 | | | $ | 1,039 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.78 | % | | | 0.55 | % | | | 0.81 | % | | | 0.73 | % | | | 0.87 | % |
Total expenses | | | 1.72 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.60 | % |
Portfolio turnover rate | | | 249 | % | | | 410 | % | | | 347 | % | | | 389 | % | | | 268 | % |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017d | | | Year Ended
March 31,
2016d | |
Per Share Data |
Net asset value, beginning of period | | $ | 56.49 | | | $ | 60.56 | | | $ | 55.26 | | | $ | 46.24 | | | $ | 50.14 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .01 | | | | (.16 | ) | | | — | e | | | (.07 | ) | | | .11 | |
Net gain (loss) on investments (realized and unrealized) | | | (11.59 | ) | | | (.75 | )f | | | 5.67 | | | | 9.54 | | | | (3.55 | ) |
Total from investment operations | | | (11.58 | ) | | | (.91 | ) | | | 5.67 | | | | 9.47 | | | | (3.44 | ) |
Less distributions from: |
Net investment income | | | (.32 | ) | | | (.89 | ) | | | (.37 | ) | | | (.45 | ) | | | (.30 | ) |
Net realized gains | | | — | | | | (2.27 | ) | | | — | | | | — | | | | (.16 | ) |
Total distributions | | | (.32 | ) | | | (3.16 | ) | | | (.37 | ) | | | (.45 | ) | | | (.46 | ) |
Net asset value, end of period | | $ | 44.59 | | | $ | 56.49 | | | $ | 60.56 | | | $ | 55.26 | | | $ | 46.24 | |
|
Total Returnb | | | (20.66 | %) | | | (1.15 | %) | | | 10.27 | % | | | 20.51 | % | | | (6.89 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 638 | | | $ | 985 | | | $ | 2,218 | | | $ | 2,270 | | | $ | 1,065 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.02 | % | | | (0.27 | %) | | | — | g | | | (0.13 | %) | | | 0.22 | % |
Total expenses | | | 2.47 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 249 | % | | | 410 | % | | | 347 | % | | | 389 | % | | | 268 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017d | | | Year Ended
March 31,
2016c,d | |
Per Share Data |
Net asset value, beginning of period | | $ | 62.26 | | | $ | 65.93 | | | $ | 59.67 | | | $ | 49.53 | | | $ | 53.30 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .54 | | | | .03 | | | | .46 | | | | .33 | | | | .43 | |
Net gain (loss) on investments (realized and unrealized) | | | (12.95 | ) | | | (.54 | )f | | | 6.17 | | | | 10.26 | | | | (3.74 | ) |
Total from investment operations | | | (12.41 | ) | | | (.51 | ) | | | 6.63 | | | | 10.59 | | | | (3.31 | ) |
Less distributions from: |
Net investment income | | | (.32 | ) | | | (.89 | ) | | | (.37 | ) | | | (.45 | ) | | | (.30 | ) |
Net realized gains | | | — | | | | (2.27 | ) | | | — | | | | — | | | | (.16 | ) |
Total distributions | | | (.32 | ) | | | (3.16 | ) | | | (.37 | ) | | | (.45 | ) | | | (.46 | ) |
Net asset value, end of period | | $ | 49.53 | | | $ | 62.26 | | | $ | 65.93 | | | $ | 59.67 | | | $ | 49.53 | |
|
Total Return | | | (20.08 | %) | | | (0.42 | %) | | | 11.11 | % | | | 21.43 | % | | | (6.25 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 611 | | | $ | 1,606 | | | $ | 3,014 | | | $ | 18,259 | | | $ | 3,028 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.81 | % | | | 0.05 | % | | | 0.72 | % | | | 0.58 | % | | | 0.83 | % |
Total expenses | | | 1.72 | % | | | 1.73 | % | | | 1.63 | % | | | 1.63 | % | | | 1.65 | % |
Portfolio turnover rate | | | 249 | % | | | 410 | % | | | 347 | % | | | 389 | % | | | 268 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
d | Share split — Per share amounts for the periods presented through March 31, 2017 have been restated to reflect a 2:1 share split effective October 31, 2016. |
e | Net investment income is less than $0.01 per share. |
f | The amount shown for a share outstanding throughout the period does not accord with the aggregate net gains on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
g | Less than 0.01%. |
76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
HEALTH CARE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the health care industry (“Health Care Companies”).
For the one-year period ended March 31, 2020, Health Care Fund Investor Class returned -5.49%, compared with -1.01% for the S&P 500 Health Care Index. The broader S&P 500 Index returned -6.98%.
Health care technology contributed the most to the Fund’s return, followed by health care services and health care distributors. Pharmaceuticals, biotechnology, and life sciences tools & services detracted the most from return.
DexCom, Inc., Teladoc Health, Inc., and Array BioPharma, Inc. contributed the most to the Fund’s return for the period. Tilray, Inc., Canopy Growth Corp., and Amarin Corporation plc ADR detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 17, 1998 |
A-Class | September 1, 2004 |
C-Class | March 30, 2001 |
H-Class | May 11, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Johnson & Johnson | 3.7% |
UnitedHealth Group, Inc. | 3.0% |
Merck & Company, Inc. | 2.7% |
Pfizer, Inc. | 2.6% |
Eli Lilly & Co. | 2.5% |
Abbott Laboratories | 2.4% |
Bristol-Myers Squibb Co. | 2.3% |
Gilead Sciences, Inc. | 2.2% |
Amgen, Inc. | 2.1% |
Thermo Fisher Scientific, Inc. | 2.1% |
Top Ten Total | 25.6% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 77 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (5.49%) | 2.55% | 10.70% |
A-Class Shares | (5.76%) | 2.28% | 10.43% |
A-Class Shares with sales charge‡ | (10.25%) | 1.28% | 9.89% |
C-Class Shares | (6.45%) | 1.52% | 9.63% |
C-Class Shares with CDSC§ | (7.38%) | 1.52% | 9.63% |
H-Class Shares** | (5.73%) | 2.26% | 10.29% |
S&P 500 Health Care Index | (1.01%) | 6.01% | 12.83% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
78 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
HEALTH CARE FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.4% |
| | | | | | | | | |
Pharmaceuticals - 35.0% |
Johnson & Johnson | | | 5,580 | | | $ | 731,705 | |
Merck & Company, Inc. | | | 7,012 | | | | 539,503 | |
Pfizer, Inc. | | | 15,726 | | | | 513,297 | |
Eli Lilly & Co. | | | 3,559 | | | | 493,704 | |
Bristol-Myers Squibb Co. | | | 8,081 | | | | 450,435 | |
AbbVie, Inc. | | | 5,407 | | | | 411,959 | |
CVS Health Corp. | | | 5,504 | | | | 326,552 | |
Cigna Corp. | | | 1,809 | | | | 320,519 | |
Allergan plc | | | 1,742 | | | | 308,508 | |
Becton Dickinson and Co. | | | 1,326 | | | | 304,675 | |
Zoetis, Inc. | | | 2,524 | | | | 297,050 | |
DexCom, Inc.* | | | 864 | | | | 232,649 | |
McKesson Corp. | | | 1,531 | | | | 207,083 | |
AmerisourceBergen Corp. — Class A | | | 2,069 | | | | 183,106 | |
Cardinal Health, Inc. | | | 3,189 | | | | 152,881 | |
AstraZeneca plc ADR | | | 3,062 | | | | 136,749 | |
Novartis AG ADR | | | 1,512 | | | | 124,664 | |
GW Pharmaceuticals plc ADR*,1 | | | 1,266 | | | | 110,864 | |
GlaxoSmithKline plc ADR | | | 2,917 | | | | 110,525 | |
Neurocrine Biosciences, Inc.* | | | 1,225 | | | | 106,024 | |
Elanco Animal Health, Inc.* | | | 4,679 | | | | 104,763 | |
Mylan N.V.* | | | 6,727 | | | | 100,300 | |
Sarepta Therapeutics, Inc.* | | | 1,025 | | | | 100,266 | |
Jazz Pharmaceuticals plc* | | | 995 | | | | 99,241 | |
Canopy Growth Corp.*,1 | | | 6,639 | | | | 95,734 | |
Alkermes plc* | | | 6,272 | | | | 90,442 | |
Horizon Therapeutics plc* | | | 3,009 | | | | 89,127 | |
PRA Health Sciences, Inc.* | | | 1,002 | | | | 83,206 | |
Bausch Health Companies, Inc.* | | | 4,458 | | | | 69,099 | |
Global Blood Therapeutics, Inc.* | | | 1,175 | | | | 60,031 | |
Total Pharmaceuticals | | | | | | | 6,954,661 | |
| | | | | | | | | |
Healthcare-Products - 26.5% |
Abbott Laboratories | | | 5,929 | | | | 467,857 | |
Thermo Fisher Scientific, Inc. | | | 1,464 | | | | 415,190 | |
Danaher Corp. | | | 2,882 | | | | 398,898 | |
Medtronic plc | | | 3,357 | | | | 302,734 | |
Stryker Corp. | | | 1,774 | | | | 295,353 | |
Intuitive Surgical, Inc.* | | | 586 | | | | 290,193 | |
Baxter International, Inc. | | | 3,320 | | | | 269,551 | |
Boston Scientific Corp.* | | | 7,359 | | | | 240,124 | |
Edwards Lifesciences Corp.* | | | 1,255 | | | | 236,718 | |
ResMed, Inc. | | | 1,269 | | | | 186,911 | |
IDEXX Laboratories, Inc.* | | | 761 | | | | 184,345 | |
Zimmer Biomet Holdings, Inc. | | | 1,554 | | | | 157,078 | |
Wright Medical Group N.V.* | | | 5,058 | | | | 144,912 | |
Cooper Companies, Inc. | | | 519 | | | | 143,073 | |
STERIS plc | | | 1,002 | | | | 140,250 | |
Masimo Corp.* | | | 775 | | | | 137,268 | |
Teleflex, Inc. | | | 464 | | | | 135,887 | |
Insulet Corp.* | | | 800 | | | | 132,544 | |
Align Technology, Inc.* | | | 708 | | | | 123,157 | |
Novocure Ltd.* | | | 1,632 | | | | 109,899 | |
Varian Medical Systems, Inc.* | | | 1,057 | | | | 108,512 | |
Hologic, Inc.* | | | 3,004 | | | | 105,440 | |
ABIOMED, Inc.* | | | 696 | | | | 101,031 | |
Dentsply Sirona, Inc. | | | 2,597 | | | | 100,841 | |
Henry Schein, Inc.* | | | 1,917 | | | | 96,847 | |
Repligen Corp.* | | | 998 | | | | 96,347 | |
Tandem Diabetes Care, Inc.* | | | 1,340 | | | | 86,229 | |
NuVasive, Inc.* | | | 1,092 | | | | 55,321 | |
Total Healthcare-Products | | | | | | | 5,262,510 | |
| | | | | | | | | |
Biotechnology - 19.8% |
Gilead Sciences, Inc. | | | 5,833 | | | | 436,075 | |
Amgen, Inc. | | | 2,071 | | | | 419,854 | |
Regeneron Pharmaceuticals, Inc.* | | | 717 | | | | 350,104 | |
Vertex Pharmaceuticals, Inc.* | | | 1,441 | | | | 342,886 | |
Biogen, Inc.* | | | 1,027 | | | | 324,922 | |
Illumina, Inc.* | | | 887 | | | | 242,258 | |
Seattle Genetics, Inc.* | | | 1,600 | | | | 184,608 | |
Alexion Pharmaceuticals, Inc.* | | | 1,846 | | | | 165,752 | |
BioMarin Pharmaceutical, Inc.* | | | 1,917 | | | | 161,987 | |
ncyte Corp.* | | | 2,032 | | | | 148,803 | |
Alnylam Pharmaceuticals, Inc.* | | | 1,271 | | | | 138,348 | |
ACADIA Pharmaceuticals, Inc.* | | | 2,478 | | | | 104,696 | |
Guardant Health, Inc.* | | | 1,404 | | | | 97,718 | |
Ionis Pharmaceuticals, Inc.* | | | 2,004 | | | | 94,749 | |
Exact Sciences Corp.* | | | 1,591 | | | | 92,278 | |
Exelixis, Inc.* | | | 5,299 | | | | 91,249 | |
United Therapeutics Corp.* | | | 926 | | | | 87,808 | |
Nektar Therapeutics* | | | 3,739 | | | | 66,741 | |
Blueprint Medicines Corp.* | | | 1,050 | | | | 61,404 | |
Mirati Therapeutics, Inc.* | | | 759 | | | | 58,344 | |
Immunomedics, Inc.* | | | 4,277 | | | | 57,654 | |
Bluebird Bio, Inc.* | | | 1,030 | | | | 47,339 | |
Arrowhead Pharmaceuticals, Inc.* | | | 1,593 | | | | 45,831 | |
Intercept Pharmaceuticals, Inc.* | | | 696 | | | | 43,820 | |
Sage Therapeutics, Inc.* | | | 1,233 | | | | 35,412 | |
Amarin Corporation plc ADR*,1 | | | 7,069 | | | | 28,276 | |
Total Biotechnology | | | | | | | 3,928,916 | |
| | | | | | | | | |
Healthcare-Services - 13.4% |
UnitedHealth Group, Inc. | | | 2,363 | | | | 589,285 | |
Centene Corp.* | | | 5,113 | | | | 303,763 | |
Anthem, Inc. | | | 1,209 | | | | 274,492 | |
Humana, Inc. | | | 798 | | | | 250,588 | |
Teladoc Health, Inc.* | | | 1,223 | | | | 189,577 | |
HCA Healthcare, Inc. | | | 2,009 | | | | 180,509 | |
IQVIA Holdings, Inc.* | | | 1,492 | | | | 160,927 | |
DaVita, Inc.* | | | 1,738 | | | | 132,192 | |
Laboratory Corporation of America Holdings* | | | 998 | | | | 126,137 | |
Molina Healthcare, Inc.* | | | 894 | | | | 124,901 | |
Quest Diagnostics, Inc. | | | 1,471 | | | | 118,121 | |
Amedisys, Inc.* | | | 588 | | | | 107,922 | |
Universal Health Services, Inc. — Class B | | | 1,023 | | | | 101,359 | |
Total Healthcare-Services | | | | | | | 2,659,773 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
HEALTH CARE FUND | |
| | Shares | | | Value | |
Electronics - 2.4% |
Agilent Technologies, Inc. | | | 2,510 | | | $ | 179,766 | |
Mettler-Toledo International, Inc.* | | | 230 | | | | 158,817 | |
Waters Corp.* | | | 692 | | | | 125,979 | |
Total Electronics | | | | | | | 464,562 | |
| | | | | | | | | |
Software - 2.0% |
Veeva Systems, Inc. — Class A* | | | 1,386 | | | | 216,729 | |
Cerner Corp. | | | 2,765 | | | | 174,167 | |
Total Software | | | | | | | 390,896 | |
| | | | | | | | | |
Commercial Services - 0.3% |
HealthEquity, Inc.* | | | 1,269 | | | | 64,199 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $16,341,077) | | | | | | | 19,725,517 | |
| | | | | | | | | |
| SECURITIES LENDING COLLATERAL†,2 - 1.0% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%3 | | | 207,901 | | | | 207,901 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $207,901) | | | | | | | 207,901 | |
| | | | | | | | | |
| Total Investments - 100.4% | | | | | | | | |
| (Cost $16,548,978) | | | | | | $ | 19,933,418 | |
| Other Assets & Liabilities, net - (0.4)% | | | | | | | (73,015 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 19,860,403 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Securities lending collateral — See Note 7. |
3 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 19,725,517 | | | $ | — | | | $ | — | | | $ | 19,725,517 | |
Securities Lending Collateral | | | 207,901 | | | | — | | | | — | | | | 207,901 | |
Total Assets | | $ | 19,933,418 | | | $ | — | | | $ | — | | | $ | 19,933,418 | |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $186,466 of securities loaned (cost $16,548,978) | | $ | 19,933,418 | |
Cash | | | 124 | |
Receivables: |
Securities sold | | | 3,312,395 | |
Fund shares sold | | | 168,041 | |
Dividends | | | 19,026 | |
Foreign tax reclaims | | | 4,792 | |
Securities lending income | | | 2,753 | |
Total assets | | | 23,440,549 | |
| | | | | |
Liabilities: |
Line of credit | | | 85,000 | |
Payable for: |
Fund shares redeemed | | | 3,219,095 | |
Return of securities lending collateral | | | 207,901 | |
Management fees | | | 17,569 | |
Transfer agent and administrative fees | | | 6,978 | |
Distribution and service fees | | | 3,367 | |
Portfolio accounting fees | | | 2,067 | |
Trustees’ fees* | | | 584 | |
Miscellaneous | | | 37,585 | |
Total liabilities | | | 3,580,146 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 19,860,403 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 22,169,741 | |
Total distributable earnings (loss) | | | (2,309,338 | ) |
Net assets | | $ | 19,860,403 | |
| | | | | |
Investor Class: |
Net assets | | $ | 12,407,894 | |
Capital shares outstanding | | | 409,916 | |
Net asset value per share | | $ | 30.27 | |
| | | | | |
A-Class: |
Net assets | | $ | 3,605,848 | |
Capital shares outstanding | | | 131,952 | |
Net asset value per share | | $ | 27.33 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 28.69 | |
| | | | | |
C-Class: |
Net assets | | $ | 2,826,029 | |
Capital shares outstanding | | | 121,768 | |
Net asset value per share | | $ | 23.21 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,020,632 | |
Capital shares outstanding | | | 38,788 | |
Net asset value per share | | $ | 26.31 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $939) | | $ | 443,669 | |
Interest | | | 4,465 | |
Income from securities lending, net | | | 60,897 | |
Total investment income | | | 509,031 | |
| | | | | |
Expenses: |
Management fees | | | 336,745 | |
Distribution and service fees: |
A-Class | | | 14,343 | |
C-Class | | | 37,049 | |
H-Class | | | 7,221 | |
Transfer agent and administrative fees | | | 100,853 | |
Registration fees | | | 55,417 | |
Portfolio accounting fees | | | 39,617 | |
Professional fees | | | 23,708 | |
Trustees’ fees* | | | 13,121 | |
Custodian fees | | | 6,044 | |
Line of credit fees | | | 68 | |
Miscellaneous | | | 8,862 | |
Total expenses | | | 643,048 | |
Net investment loss | | | (134,017 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 10,948,048 | |
Net realized gain | | | 10,948,048 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (14,177,522 | ) |
Net change in unrealized appreciation (depreciation) | | | (14,177,522 | ) |
Net realized and unrealized loss | | | (3,229,474 | ) |
Net decrease in net assets resulting from operations | | $ | (3,363,491 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (134,017 | ) | | $ | (469,696 | ) |
Net realized gain (loss) on investments | | | 10,948,048 | | | | (7,605,390 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (14,177,522 | ) | | | 11,915,715 | |
Net increase (decrease) in net assets resulting from operations | | | (3,363,491 | ) | | | 3,840,629 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | — | | | | (1,361,205 | ) |
A-Class | | | — | | | | (91,162 | ) |
C-Class | | | — | | | | (89,879 | ) |
H-Class | | | — | | | | (269,508 | ) |
Total distributions to shareholders | | | — | | | | (1,811,754 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 117,439,229 | | | | 274,055,410 | |
A-Class | | | 8,301,767 | | | | 23,446,942 | |
C-Class | | | 2,538,334 | | | | 5,228,919 | |
H-Class | | | 12,331,415 | | | | 93,563,271 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | — | | | | 1,349,970 | |
A-Class | | | — | | | | 89,439 | |
C-Class | | | — | | | | 88,910 | |
H-Class | | | — | | | | 269,487 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (166,245,050 | ) | | | (279,558,964 | ) |
A-Class | | | (9,724,774 | ) | | | (22,601,547 | ) |
C-Class | | | (3,855,410 | ) | | | (6,354,868 | ) |
H-Class | | | (18,823,192 | ) | | | (91,153,918 | ) |
Net decrease from capital share transactions | | | (58,037,681 | ) | | | (1,576,949 | ) |
Net increase (decrease) in net assets | | | (61,401,172 | ) | | | 451,926 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 81,261,575 | | | | 80,809,649 | |
End of year | | $ | 19,860,403 | | | $ | 81,261,575 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 3,523,340 | | | | 8,641,302 | |
A-Class | | | 285,931 | | | | 858,664 | |
C-Class | | | 101,419 | | | | 212,824 | |
H-Class | | | 409,835 | | | | 3,465,327 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | — | | | | 44,480 | |
A-Class | | | — | | | | 3,252 | |
C-Class | | | — | | | | 3,772 | |
H-Class | | | — | | | | 10,185 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (5,117,046 | ) | | | (9,021,071 | ) |
A-Class | | | (321,745 | ) | | | (812,305 | ) |
C-Class | | | (154,580 | ) | | | (259,344 | ) |
H-Class | | | (653,035 | ) | | | (3,400,098 | ) |
Net decrease in shares | | | (1,925,881 | ) | | | (253,012 | ) |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 32.03 | | | $ | 28.88 | | | $ | 27.82 | | | $ | 28.65 | | | $ | 35.83 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.06 | ) | | | (.13 | ) | | | (.13 | ) | | | (.10 | ) | | | (.04 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.70 | ) | | | 3.78 | | | | 3.82 | | | | 2.79 | | | | (5.11 | ) |
Total from investment operations | | | (1.76 | ) | | | 3.65 | | | | 3.69 | | | | 2.69 | | | | (5.15 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Total distributions | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Net asset value, end of period | | $ | 30.27 | | | $ | 32.03 | | | $ | 28.88 | | | $ | 27.82 | | | $ | 28.65 | |
|
Total Return | | | (5.49 | %) | | | 12.75 | % | | | 13.38 | % | | | 10.20 | % | | | (14.82 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 12,408 | | | $ | 64,185 | | | $ | 67,542 | | | $ | 36,468 | | | $ | 44,663 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.19 | %) | | | (0.42 | %) | | | (0.43 | %) | | | (0.36 | %) | | | (0.11 | %) |
Total expenses | | | 1.47 | % | | | 1.46 | % | | | 1.38 | % | | | 1.37 | % | | | 1.34 | % |
Portfolio turnover rate | | | 248 | % | | | 341 | % | | | 394 | % | | | 699 | % | | | 249 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 29.00 | | | $ | 26.26 | | | $ | 25.56 | | | $ | 26.68 | | | $ | 33.60 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.12 | ) | | | (.19 | ) | | | (.19 | ) | | | (.17 | ) | | | (.13 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.55 | ) | | | 3.43 | | | | 3.52 | | | | 2.57 | | | | (4.76 | ) |
Total from investment operations | | | (1.67 | ) | | | 3.24 | | | | 3.33 | | | | 2.40 | | | | (4.89 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Total distributions | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Net asset value, end of period | | $ | 27.33 | | | $ | 29.00 | | | $ | 26.26 | | | $ | 25.56 | | | $ | 26.68 | |
|
Total Returnb | | | (5.76 | %) | | | 12.46 | % | | | 13.14 | % | | | 9.85 | % | | | (15.04 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,606 | | | $ | 4,865 | | | $ | 3,102 | | | $ | 4,626 | | | $ | 6,410 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.43 | %) | | | (0.68 | %) | | | (0.69 | %) | | | (0.62 | %) | | | (0.42 | %) |
Total expenses | | | 1.73 | % | | | 1.72 | % | | | 1.63 | % | | | 1.62 | % | | | 1.59 | % |
Portfolio turnover rate | | | 248 | % | | | 341 | % | | | 394 | % | | | 699 | % | | | 249 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 24.81 | | | $ | 22.69 | | | $ | 22.58 | | | $ | 24.13 | | | $ | 30.82 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.30 | ) | | | (.35 | ) | | | (.34 | ) | | | (.33 | ) | | | (.33 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.30 | ) | | | 2.97 | | | | 3.08 | | | | 2.30 | | | | (4.33 | ) |
Total from investment operations | | | (1.60 | ) | | | 2.62 | | | | 2.74 | | | | 1.97 | | | | (4.66 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Total distributions | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Net asset value, end of period | | $ | 23.21 | | | $ | 24.81 | | | $ | 22.69 | | | $ | 22.58 | | | $ | 24.13 | |
|
Total Returnb | | | (6.45 | %) | | | 11.68 | % | | | 12.24 | % | | | 9.07 | % | | | (15.67 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,826 | | | $ | 4,340 | | | $ | 4,940 | | | $ | 4,959 | | | $ | 8,284 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.20 | %) | | | (1.42 | %) | | | (1.42 | %) | | | (1.37 | %) | | | (1.17 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 248 | % | | | 341 | % | | | 394 | % | | | 699 | % | | | 249 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 27.91 | | | $ | 25.29 | | | $ | 24.72 | | | $ | 25.91 | | | $ | 32.71 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.13 | ) | | | (.18 | ) | | | (.21 | ) | | | (.16 | ) | | | (.14 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.47 | ) | | | 3.30 | | | | 3.41 | | | | 2.49 | | | | (4.63 | ) |
Total from investment operations | | | (1.60 | ) | | | 3.12 | | | | 3.20 | | | | 2.33 | | | | (4.77 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Total distributions | | | — | | | | (.50 | ) | | | (2.63 | ) | | | (3.52 | ) | | | (2.03 | ) |
Net asset value, end of period | | $ | 26.31 | | | $ | 27.91 | | | $ | 25.29 | | | $ | 24.72 | | | $ | 25.91 | |
|
Total Return | | | (5.73 | %) | | | 12.46 | % | | | 13.06 | % | | | 9.87 | % | | | (15.08 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,021 | | | $ | 7,871 | | | $ | 5,225 | | | $ | 4,809 | | | $ | 5,244 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.45 | %) | | | (0.66 | %) | | | (0.77 | %) | | | (0.62 | %) | | | (0.44 | %) |
Total expenses | | | 1.72 | % | | | 1.73 | % | | | 1.64 | % | | | 1.62 | % | | | 1.71 | % |
Portfolio turnover rate | | | 248 | % | | | 341 | % | | | 394 | % | | | 699 | % | | | 249 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INTERNET FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that provide products or services designed for or related to the Internet (“Internet Companies”).
For the one-year period ended March 31, 2020, Internet Fund Investor Class returned -8.25%, compared with 10.43% for the S&P 500 Information Technology Index. The broader S&P 500 Index returned -6.98%.
Interactive home entertainment contributed the most to return, followed by Internet services & infrastructure and specialized REITs. Interactive media & services, communications equipment, and Internet & direct marketing retail detracted the most from return.
Amazon.com, Inc., Shopify, Inc. – Class A, and Pinduoduo, Inc. ADR contributed the most to the Fund’s return for the period. Cisco Systems, Inc., Wayfair, Inc. – Class A, and Expedia Group, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 6, 2000 |
A-Class | September 1, 2004 |
C-Class | April 19, 2001 |
H-Class | April 6, 2000 |
Ten Largest Holdings (% of Total Net Assets) |
Amazon.com, Inc. | 9.4% |
Alphabet, Inc. — Class A | 7.6% |
Facebook, Inc. — Class A | 5.6% |
Netflix, Inc. | 3.9% |
Alibaba Group Holding Ltd. ADR | 3.5% |
Cisco Systems, Inc. | 3.4% |
salesforce.com, Inc. | 3.1% |
PayPal Holdings, Inc. | 2.9% |
Activision Blizzard, Inc. | 2.0% |
Uber Technologies, Inc. | 1.9% |
Top Ten Total | 43.3% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 85 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (8.25%) | 10.06% | 12.28% |
A-Class Shares | (8.48%) | 9.78% | 12.00% |
A-Class Shares with sales charge‡ | (12.82%) | 8.72% | 11.46% |
C-Class Shares | (9.16%) | 8.97% | 11.16% |
C-Class Shares with CDSC§ | (10.03%) | 8.97% | 11.16% |
H-Class Shares** | (8.49%) | 9.77% | 11.84% |
S&P 500 Information Technology Index | 10.43% | 17.05% | 15.79% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
86 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INTERNET FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.7% |
| | | | | | | | | |
Internet - 60.3% |
Amazon.com, Inc.* | | | 749 | | | $ | 1,460,340 | |
Alphabet, Inc. — Class A* | | | 1,016 | | | | 1,180,541 | |
Facebook, Inc. — Class A* | | | 5,267 | | | | 878,536 | |
Netflix, Inc.* | | | 1,612 | | | | 605,306 | |
Alibaba Group Holding Ltd. ADR* | | | 2,784 | | | | 541,432 | |
Uber Technologies, Inc.* | | | 10,797 | | | | 301,452 | |
Booking Holdings, Inc.* | | | 206 | | | | 277,136 | |
JD.com, Inc. ADR* | | | 6,678 | | | | 270,459 | |
Shopify, Inc. — Class A* | | | 489 | | | | 203,879 | |
eBay, Inc. | | | 6,748 | | | | 202,845 | |
VeriSign, Inc.* | | | 1,121 | | | | 201,881 | |
Chewy, Inc. — Class A* | | | 5,274 | | | | 197,722 | |
Baidu, Inc. ADR* | | | 1,792 | | | | 180,616 | |
Okta, Inc.* | | | 1,460 | | | | 178,500 | |
Match Group, Inc.*,1 | | | 2,607 | | | | 172,166 | |
Twitter, Inc.* | | | 6,993 | | | | 171,748 | |
Snap, Inc. — Class A* | | | 13,438 | | | | 159,778 | |
Pinduoduo, Inc. ADR* | | | 4,127 | | | | 148,696 | |
IAC/InterActiveCorp* | | | 819 | | | | 146,789 | |
MercadoLibre, Inc.* | | | 290 | | | | 141,688 | |
GoDaddy, Inc. — Class A* | | | 2,249 | | | | 128,441 | |
Pinterest, Inc. — Class A* | | | 7,610 | | | | 117,499 | |
Spotify Technology S.A.* | | | 912 | | | | 110,753 | |
Trip.com Group Ltd. ADR* | | | 4,703 | | | | 110,285 | |
Zillow Group, Inc. — Class C*,1 | | | 3,041 | | | | 109,537 | |
JOYY, Inc. ADR* | | | 1,977 | | | | 105,295 | |
F5 Networks, Inc.* | | | 919 | | | | 97,993 | |
Wix.com Ltd.* | | | 948 | | | | 95,577 | |
Autohome, Inc. ADR* | | | 1,317 | | | | 93,533 | |
Expedia Group, Inc. | | | 1,656 | | | | 93,183 | |
Weibo Corp. ADR* | | | 2,721 | | | | 90,092 | |
Etsy, Inc.* | | | 2,302 | | | | 88,489 | |
Baozun, Inc. ADR*,1 | | | 3,135 | | | | 87,592 | |
Wayfair, Inc. — Class A*,1 | | | 1,490 | | | | 79,626 | |
GrubHub, Inc.* | | | 1,919 | | | | 78,161 | |
Momo, Inc. ADR | | | 3,454 | | | | 74,917 | |
Anaplan, Inc.* | | | 2,263 | | | | 68,478 | |
TripAdvisor, Inc. | | | 3,039 | | | | 52,848 | |
Cargurus, Inc.* | | | 2,468 | | | | 46,744 | |
Stitch Fix, Inc. — Class A*,1 | | | 2,745 | | | | 34,862 | |
Total Internet | | | | | | | 9,385,415 | |
| | | | | | | | | |
Software - 22.8% |
salesforce.com, Inc.* | | | 3,309 | | | | 476,430 | |
Activision Blizzard, Inc. | | | 5,143 | | | | 305,905 | |
Electronic Arts, Inc.* | | | 2,352 | | | | 235,600 | |
Veeva Systems, Inc. — Class A* | | | 1,497 | | | | 234,086 | |
Citrix Systems, Inc. | | | 1,537 | | | | 217,562 | |
DocuSign, Inc.* | | | 2,235 | | | | 206,514 | |
Akamai Technologies, Inc.* | | | 1,979 | | | | 181,059 | |
NetEase, Inc. ADR | | | 534 | | | | 171,393 | |
Take-Two Interactive Software, Inc.* | | | 1,381 | | | | 163,800 | |
Twilio, Inc. — Class A* | | | 1,661 | | | | 148,643 | |
Sea Ltd. ADR* | | | 3,035 | | | | 134,481 | |
Coupa Software, Inc.* | | | 934 | | | | 130,508 | |
MongoDB, Inc.* | | | 934 | | | | 127,528 | |
Dropbox, Inc. — Class A* | | | 6,647 | | | | 120,311 | |
HUYA, Inc. ADR* | | | 6,130 | | | | 103,903 | |
Five9, Inc.* | | | 1,348 | | | | 103,068 | |
Smartsheet, Inc. — Class A* | | | 2,368 | | | | 98,296 | |
HubSpot, Inc.* | | | 735 | | | | 97,895 | |
j2 Global, Inc. | | | 1,030 | | | | 77,095 | |
New Relic, Inc.* | | | 1,326 | | | | 61,314 | |
Nutanix, Inc. — Class A* | | | 3,531 | | | | 55,790 | |
Cornerstone OnDemand, Inc.* | | | 1,460 | | | | 46,355 | |
Pluralsight, Inc. — Class A* | | | 4,062 | | | | 44,601 | |
Total Software | | | | | | | 3,542,137 | |
| | | | | | | | | |
Telecommunications - 8.7% |
Cisco Systems, Inc. | | | 13,270 | | | | 521,644 | |
Motorola Solutions, Inc. | | | 1,465 | | | | 194,728 | |
Arista Networks, Inc.* | | | 866 | | | | 175,408 | |
Ciena Corp.* | | | 2,733 | | | | 108,801 | |
Juniper Networks, Inc. | | | 5,264 | | | | 100,753 | |
LogMeIn, Inc. | | | 1,071 | | | | 89,193 | |
Viavi Solutions, Inc.* | | | 5,417 | | | | 60,724 | |
CommScope Holding Company, Inc.* | | | 5,293 | | | | 48,219 | |
ViaSat, Inc.* | | | 1,313 | | | | 47,163 | |
Total Telecommunications | | | | | | | 1,346,633 | |
| | | | | | | | | |
Commercial Services - 4.5% |
PayPal Holdings, Inc.* | | | 4,668 | | | | 446,914 | |
CoStar Group, Inc.* | | | 355 | | | | 208,460 | |
2U, Inc.* | | | 2,260 | | | | 47,957 | |
Total Commercial Services | | | | | | | 703,331 | |
| | | | | | | | | |
Diversified Financial Services - 1.7% |
TD Ameritrade Holding Corp. | | | 4,721 | | | | 163,629 | |
E*TRADE Financial Corp. | | | 3,159 | | | | 108,417 | |
Total Diversified Financial Services | | | | | | | 272,046 | |
| | | | | | | | | |
Banks - 1.0% |
Northern Trust Corp. | | | 2,017 | | | | 152,203 | |
| | | | | | | | | |
Computers - 0.7% |
Lumentum Holdings, Inc.* | | | 1,395 | | | | 102,812 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $12,489,542) | | | | | | | 15,504,577 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INTERNET FUND | |
| | | Face
Amount | | | Value | |
| REPURCHASE AGREEMENTS††,2 - 0.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 49,050 | | | $ | 49,050 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 18,865 | | | | 18,865 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $67,915) | | | | | | | 67,915 | |
| | | Shares | | | | |
| SECURITIES LENDING COLLATERAL†,3 - 2.4% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 380,695 | | | | 380,695 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $380,695) | | | | | | | 380,695 | |
| | | | | | | | | |
| Total Investments - 102.5% | | | | | | | | |
| (Cost $12,938,152) | | | | | | $ | 15,953,187 | |
| Other Assets & Liabilities, net - (2.5)% | | | | | | | (395,572 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 15,557,615 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 15,504,577 | | | $ | — | | | $ | — | | | $ | 15,504,577 | |
Repurchase Agreements | | | — | | | | 67,915 | | | | — | | | | 67,915 | |
Securities Lending Collateral | | | 380,695 | | | | — | | | | — | | | | 380,695 | |
Total Assets | | $ | 15,885,272 | | | $ | 67,915 | | | $ | — | | | $ | 15,953,187 | |
88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $372,658 of securities loaned (cost $12,870,237) | | $ | 15,885,272 | |
Repurchase agreements, at value (cost $67,915) | | | 67,915 | |
Cash | | | 54,448 | |
Receivables: |
Securities sold | | | 761,255 | |
Fund shares sold | | | 4,528 | |
Dividends | | | 2,282 | |
Securities lending income | | | 620 | |
Total assets | | | 16,776,320 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 787,476 | |
Return of securities lending collateral | | | 380,695 | |
Management fees | | | 13,089 | |
Transfer agent and administrative fees | | | 5,007 | |
Distribution and service fees | | | 2,099 | |
Portfolio accounting fees | | | 1,540 | |
Trustees’ fees* | | | 440 | |
Miscellaneous | | | 28,359 | |
Total liabilities | | | 1,218,705 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 15,557,615 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 17,198,691 | |
Total distributable earnings (loss) | | | (1,641,076 | ) |
Net assets | | $ | 15,557,615 | |
| | | | | |
Investor Class: |
Net assets | | $ | 10,740,957 | |
Capital shares outstanding | | | 102,071 | |
Net asset value per share | | $ | 105.23 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,060,195 | |
Capital shares outstanding | | | 21,223 | |
Net asset value per share | | $ | 97.07 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 101.91 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,931,489 | |
Capital shares outstanding | | | 23,298 | |
Net asset value per share | | $ | 82.90 | |
| | | | | |
H-Class: |
Net assets | | $ | 824,974 | |
Capital shares outstanding | | | 8,804 | |
Net asset value per share | | $ | 93.70 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $2,282) | | $ | 117,276 | |
Interest | | | 3,893 | |
Income from securities lending, net | | | 11,749 | |
Total investment income | | | 132,918 | |
| | | | | |
Expenses: |
Management fees | | | 281,235 | |
Distribution and service fees: |
A-Class | | | 5,146 | |
C-Class | | | 26,196 | |
H-Class | | | 6,726 | |
Transfer agent and administrative fees | | | 83,874 | |
Portfolio accounting fees | | | 33,086 | |
Registration fees | | | 27,549 | |
Professional fees | | | 9,555 | |
Trustees’ fees* | | | 7,296 | |
Custodian fees | | | 4,932 | |
Line of credit fees | | | 6 | |
Miscellaneous | | | 39,906 | |
Total expenses | | | 525,507 | |
Net investment loss | | | (392,589 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (1,629,638 | ) |
Net realized loss | | | (1,629,638 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (5,406,274 | ) |
Net change in unrealized appreciation (depreciation) | | | (5,406,274 | ) |
Net realized and unrealized loss | | | (7,035,912 | ) |
Net decrease in net assets resulting from operations | | $ | (7,428,501 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (392,589 | ) | | $ | (686,372 | ) |
Net realized gain (loss) on investments | | | (1,629,638 | ) | | | 4,214,037 | |
Net change in unrealized appreciation (depreciation) on investments | | | (5,406,274 | ) | | | (1,071,761 | ) |
Net increase (decrease) in net assets resulting from operations | | | (7,428,501 | ) | | | 2,455,904 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (710,898 | ) | | | (2,159,316 | ) |
A-Class | | | (61,275 | ) | | | (338,414 | ) |
C-Class | | | (101,725 | ) | | | (434,832 | ) |
H-Class | | | (29,916 | ) | | | (182,752 | ) |
Total distributions to shareholders | | | (903,814 | ) | | | (3,115,314 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 108,639,586 | | | | 123,670,906 | |
A-Class | | | 4,695,934 | | | | 7,631,660 | |
C-Class | | | 2,609,673 | | | | 3,862,907 | |
H-Class | | | 15,624,744 | | | | 119,411,263 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 702,319 | | | | 2,113,338 | |
A-Class | | | 59,412 | | | | 324,899 | |
C-Class | | | 101,270 | | | | 429,191 | |
H-Class | | | 29,888 | | | | 182,647 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (106,635,760 | ) | | | (151,216,911 | ) |
A-Class | | | (4,620,680 | ) | | | (9,166,861 | ) |
C-Class | | | (3,528,541 | ) | | | (3,937,169 | ) |
H-Class | | | (24,253,605 | ) | | | (138,271,570 | ) |
Net decrease from capital share transactions | | | (6,575,760 | ) | | | (44,965,700 | ) |
Net decrease in net assets | | | (14,908,075 | ) | | | (45,625,110 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 30,465,690 | | | | 76,090,800 | |
End of year | | $ | 15,557,615 | | | $ | 30,465,690 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 884,862 | | | | 969,839 | |
A-Class | | | 43,934 | | | | 70,880 | |
C-Class | | | 27,414 | | | | 36,507 | |
H-Class | | | 145,036 | | | | 1,015,803 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 6,142 | | | | 20,344 | |
A-Class | | | 563 | | | | 3,370 | |
C-Class | | | 1,121 | | | | 5,130 | |
H-Class | | | 293 | | | | 1,960 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (919,270 | ) | | | (1,187,111 | ) |
A-Class | | | (41,913 | ) | | | (84,558 | ) |
C-Class | | | (37,179 | ) | | | (38,110 | ) |
H-Class | | | (229,294 | ) | | | (1,178,750 | ) |
Net decrease in shares | | | (118,291 | ) | | | (364,696 | ) |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 118.80 | | | $ | 124.80 | | | $ | 95.33 | | | $ | 77.91 | | | $ | 77.87 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (1.30 | ) | | | (1.29 | ) | | | (.80 | ) | | | (.60 | ) | | | (.41 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (8.17 | ) | | | 10.79 | | | | 30.27 | | | | 18.02 | | | | .78 | |
Total from investment operations | | | (9.47 | ) | | | 9.50 | | | | 29.47 | | | | 17.42 | | | | .37 | |
Less distributions from: |
Net realized gains | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Total distributions | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Net asset value, end of period | | $ | 105.23 | | | $ | 118.80 | | | $ | 124.80 | | | $ | 95.33 | | | $ | 77.91 | |
|
Total Return | | | (8.25 | %) | | | 9.39 | % | | | 30.91 | % | | | 22.36 | % | | | 0.46 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 10,741 | | | $ | 15,484 | | | $ | 40,843 | | | $ | 17,670 | | | $ | 24,435 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.08 | %) | | | (1.00 | %) | | | (0.71 | %) | | | (0.70 | %) | | | (0.52 | %) |
Total expenses | | | 1.47 | % | | | 1.45 | % | | | 1.38 | % | | | 1.37 | % | | | 1.35 | % |
Portfolio turnover rate | | | 359 | % | | | 349 | % | | | 305 | % | | | 518 | % | | | 520 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 110.18 | | | $ | 117.20 | | | $ | 89.75 | | | $ | 73.54 | | | $ | 73.71 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (1.32 | ) | | | (1.46 | ) | | | (1.01 | ) | | | (.76 | ) | | | (.69 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (7.69 | ) | | | 9.94 | | | | 28.46 | | | | 16.97 | | | | .85 | |
Total from investment operations | | | (9.01 | ) | | | 8.48 | | | | 27.45 | | | | 16.21 | | | | .16 | |
Less distributions from: |
Net realized gains | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Total distributions | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Net asset value, end of period | | $ | 97.07 | | | $ | 110.18 | | | $ | 117.20 | | | $ | 89.75 | | | $ | 73.54 | |
|
Total Returnb | | | (8.48 | %) | | | 9.13 | % | | | 30.57 | % | | | 22.04 | % | | | 0.20 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,060 | | | $ | 2,054 | | | $ | 3,393 | | | $ | 2,139 | | | $ | 1,803 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.20 | %) | | | (1.27 | %) | | | (0.96 | %) | | | (0.95 | %) | | | (0.92 | %) |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.60 | % |
Portfolio turnover rate | | | 359 | % | | | 349 | % | | | 305 | % | | | 518 | % | | | 520 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 95.40 | | | $ | 104.40 | | | $ | 80.55 | | | $ | 66.49 | | | $ | 67.17 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (1.96 | ) | | | (2.08 | ) | | | (1.60 | ) | | | (1.24 | ) | | | (1.03 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (6.44 | ) | | | 8.58 | | | | 25.45 | | | | 15.30 | | | | .68 | |
Total from investment operations | | | (8.40 | ) | | | 6.50 | | | | 23.85 | | | | 14.06 | | | | (.35 | ) |
Less distributions from: |
Net realized gains | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Total distributions | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Net asset value, end of period | | $ | 82.90 | | | $ | 95.40 | | | $ | 104.40 | | | $ | 80.55 | | | $ | 66.49 | |
|
Total Returnb | | | (9.16 | %) | | | 8.31 | % | | | 29.61 | % | | | 21.13 | % | | | (0.54 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,931 | | | $ | 3,047 | | | $ | 2,967 | | | $ | 2,321 | | | $ | 2,798 | |
Ratios to average net assets: |
Net investment income (loss) | | | (2.06 | %) | | | (2.01 | %) | | | (1.70 | %) | | | (1.71 | %) | | | (1.53 | %) |
Total expenses | | | 2.47 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 359 | % | | | 349 | % | | | 305 | % | | | 518 | % | | | 520 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 106.51 | | | $ | 113.84 | | | $ | 87.18 | | | $ | 71.40 | | | $ | 71.64 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (1.41 | ) | | | (1.51 | ) | | | (1.07 | ) | | | (.78 | ) | | | (.72 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (7.30 | ) | | | 9.68 | | | | 27.73 | | | | 16.56 | | | | .81 | |
Total from investment operations | | | (8.71 | ) | | | 8.17 | | | | 26.66 | | | | 15.78 | | | | .09 | |
Less distributions from: |
Net realized gains | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Total distributions | | | (4.10 | ) | | | (15.50 | ) | | | — | | | | — | | | | (.33 | ) |
Net asset value, end of period | | $ | 93.70 | | | $ | 106.51 | | | $ | 113.84 | | | $ | 87.18 | | | $ | 71.40 | |
|
Total Return | | | (8.49 | %) | | | 9.12 | % | | | 30.59 | % | | | 22.09 | % | | | 0.11 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 825 | | | $ | 9,880 | | | $ | 28,889 | | | $ | 2,384 | | | $ | 7,132 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.30 | %) | | | (1.27 | %) | | | (1.04 | %) | | | (1.03 | %) | | | (0.97 | %) |
Total expenses | | | 1.71 | % | | | 1.70 | % | | | 1.63 | % | | | 1.62 | % | | | 1.67 | % |
Portfolio turnover rate | | | 359 | % | | | 349 | % | | | 305 | % | | | 518 | % | | | 520 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
LEISURE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in leisure and entertainment businesses (“Leisure Companies”).
For the one-year period ended March 31, 2020, Leisure Fund Investor Class returned -22.96%, compared with -10.77% for the S&P 500 Consumer Discretionary Index. The broader S&P 500 Index returned -6.98%.
Interactive home entertainment was the only contributor to return. Hotels, resorts & cruise lines; restaurants, and casinos & gaming detracted the most from return.
Netflix, Inc., Activision Blizzard, Inc., and Stars Group, Inc. contributed the most to the Fund’s return for the period. Carnival Corp., ViacomCBS, Inc. – Class B, and Altria Group, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | May 3, 2001 |
H-Class | June 3, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Netflix, Inc. | 5.3% |
Comcast Corp. — Class A | 4.3% |
Walt Disney Co. | 4.2% |
McDonald’s Corp. | 4.0% |
Charter Communications, Inc. — Class A | 3.9% |
Philip Morris International, Inc. | 3.8% |
Starbucks Corp. | 3.0% |
Altria Group, Inc. | 2.9% |
Activision Blizzard, Inc. | 2.7% |
Electronic Arts, Inc. | 2.1% |
Top Ten Total | 36.2% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 93 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (22.96%) | 0.22% | 8.67% |
A-Class Shares | (23.15%) | (0.03%) | 8.38% |
A-Class Shares with sales charge‡ | (26.80%) | (1.00%) | 7.85% |
C-Class Shares | (23.73%) | (0.78%) | 7.57% |
C-Class Shares with CDSC§ | (24.49%) | (0.78%) | 7.57% |
H-Class Shares** | (23.17%) | (0.04%) | 8.25% |
S&P 500 Consumer Discretionary Index | (10.77%) | 7.36% | 13.56% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Consumer Discretionary Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
94 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
LEISURE FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.1% |
| | | | | | | | | |
Media - 24.0% |
Comcast Corp. — Class A | | | 6,352 | | | $ | 218,382 | |
Walt Disney Co. | | | 2,198 | | | | 212,327 | |
Charter Communications, Inc. — Class A* | | | 446 | | | | 194,594 | |
Liberty Broadband Corp. — Class C* | | | 753 | | | | 83,372 | |
Altice USA, Inc. — Class A* | | | 3,001 | | | | 66,892 | |
Fox Corp. — Class A | | | 2,546 | | | | 60,162 | |
Discovery, Inc. — Class A* | | | 2,823 | | | | 54,879 | |
Liberty Global plc — Class C* | | | 3,282 | | | | 51,560 | |
DISH Network Corp. — Class A* | | | 2,384 | | | | 47,656 | |
New York Times Co. — Class A | | | 1,402 | | | | 43,055 | |
News Corp. — Class A | | | 4,101 | | | | 36,807 | |
ViacomCBS, Inc. — Class B | | | 2,379 | | | | 33,330 | |
TEGNA, Inc. | | | 2,248 | | | | 24,413 | |
World Wrestling Entertainment, Inc. — Class A | | | 687 | | | | 23,310 | |
Nexstar Media Group, Inc. — Class A | | | 386 | | | | 22,284 | |
AMC Networks, Inc. — Class A* | | | 741 | | | | 18,014 | |
Sinclair Broadcast Group, Inc. — Class A1 | | | 1,036 | | | | 16,659 | |
Total Media | | | | | | | 1,207,696 | |
| | | | | | | | | |
Retail - 18.7% |
McDonald’s Corp. | | | 1,219 | | | | 201,562 | |
Starbucks Corp. | | | 2,278 | | | | 149,756 | |
Domino’s Pizza, Inc. | | | 231 | | | | 74,860 | |
Chipotle Mexican Grill, Inc. — Class A* | | | 114 | | | | 74,602 | |
Yum! Brands, Inc. | | | 1,083 | | | | 74,218 | |
Yum China Holdings, Inc. | | | 1,320 | | | | 56,272 | |
Restaurant Brands International, Inc. | | | 1,048 | | | | 41,951 | |
Darden Restaurants, Inc. | | | 685 | | | | 37,305 | |
Dunkin’ Brands Group, Inc. | | | 665 | | | | 35,311 | |
Wendy’s Co. | | | 2,012 | | | | 29,938 | |
Wingstop, Inc. | | | 368 | | | | 29,330 | |
Texas Roadhouse, Inc. — Class A | | | 704 | | | | 29,075 | |
Papa John’s International, Inc. | | | 448 | | | | 23,910 | |
Cracker Barrel Old Country Store, Inc.1 | | | 245 | | | | 20,389 | |
Shake Shack, Inc. — Class A* | | | 481 | | | | 18,153 | |
Jack in the Box, Inc. | | | 346 | | | | 12,127 | |
Cheesecake Factory, Inc. | | | 669 | | | | 11,426 | |
Bloomin’ Brands, Inc. | | | 1,240 | | | | 8,854 | |
Dave & Buster’s Entertainment, Inc. | | | 554 | | | | 7,246 | |
Brinker International, Inc. | | | 594 | | | | 7,134 | |
Total Retail | | | | | | | 943,419 | |
| | | | | | | | | |
Software - 12.0% |
Activision Blizzard, Inc. | | | 2,253 | | | | 134,008 | |
Electronic Arts, Inc.* | | | 1,031 | | | | 103,275 | |
NetEase, Inc. ADR | | | 276 | | | | 88,585 | |
Bilibili, Inc. ADR* | | | 3,137 | | | | 73,469 | |
Sea Ltd. ADR* | | | 1,639 | | | | 72,624 | |
Take-Two Interactive Software, Inc.* | | | 605 | | | | 71,759 | |
HUYA, Inc. ADR* | | | 3,368 | | | | 57,088 | |
Total Software | | | | | | | 600,808 | |
| | | | | | | | | |
Lodging - 10.5% |
Las Vegas Sands Corp. | | | 2,081 | | | | 88,380 | |
Marriott International, Inc. — Class A | | | 922 | | | | 68,975 | |
Hilton Worldwide Holdings, Inc. | | | 995 | | | | 67,899 | |
Huazhu Group Ltd. ADR | | | 1,491 | | | | 42,836 | |
Wynn Resorts Ltd. | | | 546 | | | | 32,864 | |
Hyatt Hotels Corp. — Class A | | | 670 | | | | 32,093 | |
Melco Resorts & Entertainment Ltd. ADR | | | 2,462 | | | | 30,529 | |
Caesars Entertainment Corp.* | | | 4,432 | | | | 29,960 | |
MGM Resorts International | | | 2,462 | | | | 29,052 | |
Choice Hotels International, Inc. | | | 462 | | | | 28,298 | |
Wyndham Hotels & Resorts, Inc. | | | 777 | | | | 24,483 | |
Wyndham Destinations, Inc. | | | 835 | | | | 18,119 | |
Boyd Gaming Corp. | | | 1,181 | | | | 17,030 | |
Hilton Grand Vacations, Inc.* | | | 980 | | | | 15,455 | |
Total Lodging | | | | | | | 525,973 | |
| | | | | | | | | |
Internet - 8.6% |
Netflix, Inc.* | | | 706 | | | | 265,103 | |
Spotify Technology S.A.* | | | 482 | | | | 58,534 | |
iQIYI, Inc. ADR* | | | 3,227 | | | | 57,441 | |
Roku, Inc.* | | | 572 | | | | 50,038 | |
Total Internet | | | | | | | 431,116 | |
| | | | | | | | | |
Agriculture - 7.7% |
Philip Morris International, Inc. | | | 2,656 | | | | 193,782 | |
Altria Group, Inc. | | | 3,814 | | | | 147,487 | |
British American Tobacco plc ADR | | | 1,357 | | | | 46,396 | |
Total Agriculture | | | | | | | 387,665 | |
| | | | | | | | | |
Beverages - 7.1% |
Brown-Forman Corp. — Class B | | | 1,665 | | | | 92,424 | |
Constellation Brands, Inc. — Class A | | | 631 | | | | 90,460 | |
Luckin Coffee, Inc. ADR*,1 | | | 1,844 | | | | 50,139 | |
Molson Coors Beverage Co. — Class B | | | 1,264 | | | | 49,309 | |
Boston Beer Company, Inc. — Class A* | | | 113 | | | | 41,534 | |
Anheuser-Busch InBev S.A. ADR1 | | | 784 | | | | 34,590 | |
Total Beverages | | | | | | | 358,456 | |
| | | | | | | | | |
Entertainment - 4.5% |
Live Nation Entertainment, Inc.* | | | 1,047 | | | | 47,597 | |
Vail Resorts, Inc. | | | 256 | | | | 37,814 | |
Churchill Downs, Inc. | | | 338 | | | | 34,797 | |
Marriott Vacations Worldwide Corp. | | | 357 | | | | 19,842 | |
Penn National Gaming, Inc.* | | | 1,332 | | | | 16,850 | |
International Game Technology plc | | | 2,311 | | | | 13,750 | |
Cinemark Holdings, Inc. | | | 1,145 | | | | 11,668 | |
Scientific Games Corp. — Class A* | | | 1,159 | | | | 11,242 | |
Six Flags Entertainment Corp. | | | 850 | | | | 10,659 | |
SeaWorld Entertainment, Inc.* | | | 963 | | | | 10,612 | |
Eldorado Resorts, Inc.* | | | 721 | | | | 10,382 | |
Total Entertainment | | | | | | | 225,213 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LEISURE FUND | |
| | Shares | | | Value | |
Leisure Time - 3.8% |
Planet Fitness, Inc. — Class A* | | | 694 | | | $ | 33,798 | |
Carnival Corp. | | | 2,376 | | | | 31,292 | |
Royal Caribbean Cruises Ltd. | | | 807 | | | | 25,961 | |
Brunswick Corp. | | | 721 | | | | 25,502 | |
Harley-Davidson, Inc. | | | 1,279 | | | | 24,211 | |
Polaris, Inc. | | | 494 | | | | 23,786 | |
Callaway Golf Co. | | | 1,326 | | | | 13,552 | |
Norwegian Cruise Line Holdings Ltd.* | | | 1,221 | | | | 13,382 | |
Total Leisure Time | | | | | | | 191,484 | |
| | | | | | | | | |
Toys, Games & Hobbies - 1.6% |
Hasbro, Inc. | | | 713 | | | | 51,015 | |
Mattel, Inc.* | | | 3,227 | | | | 28,430 | |
Total Toys, Games & Hobbies | | | | | | | 79,445 | |
| | | | | | | | | |
Food Service - 0.6% |
Aramark | | | 1,494 | | | | 29,835 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $5,109,907) | | | | | | | 4,981,110 | |
| | | | | | | | | |
RIGHTS††† - 0.0% |
Media - 0.0% |
Nexstar Media Group, Inc.*,2 | | | 8,160 | | | | — | |
Total Rights | | | | |
(Cost $—) | | | | | | | — | |
| | | Face
Amount | | | | |
| REPURCHASE AGREEMENTS††,3 - 0.3% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 11,819 | | | | 11,819 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 4,546 | | | | 4,546 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $16,365) | | | | | | | 16,365 | |
| | | | | | | | | |
| | | | Shares | | | | | |
| SECURITIES LENDING COLLATERAL†,4 - 1.6% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%5 | | | 82,215 | | | | 82,215 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $82,215) | | | | | | | 82,215 | |
| | | | | | | | | |
| Total Investments - 101.0% | | | | | | | | |
| (Cost $5,208,487) | | | | | | $ | 5,079,690 | |
| Other Assets & Liabilities, net - (1.0)% | | | | | | | (50,023 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 5,029,667 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at March 31, 2020. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
3 | Repurchase Agreements — See Note 6. |
4 | Securities lending collateral — See Note 7. |
5 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
LEISURE FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 4,981,110 | | | $ | — | | | $ | — | | | $ | 4,981,110 | |
Rights | | | — | | | | — | | | | — | * | | | — | |
Repurchase Agreements | | | — | | | | 16,365 | | | | — | | | | 16,365 | |
Securities Lending Collateral | | | 82,215 | | | | — | | | | — | | | | 82,215 | |
Total Assets | | $ | 5,063,325 | | | $ | 16,365 | | | $ | — | | | $ | 5,079,690 | |
* | Security has a market value of $0. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 97 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $83,959 of securities loaned (cost $5,192,122) | | $ | 5,063,325 | |
Repurchase agreements, at value (cost $16,365) | | | 16,365 | |
Cash | | | 13,544 | |
Receivables: |
Fund shares sold | | | 295,227 | |
Dividends | | | 11,238 | |
Foreign tax reclaims | | | 2,866 | |
Securities lending income | | | 37 | |
Total assets | | | 5,402,602 | |
| | | | | |
Liabilities: |
Payable for: |
Securities purchased | | | 267,299 | |
Return of securities lending collateral | | | 82,215 | |
Fund shares redeemed | | | 9,491 | |
Management fees | | | 3,458 | |
Transfer agent and administrative fees | | | 1,603 | |
Distribution and service fees | | | 667 | |
Portfolio accounting fees | | | 407 | |
Trustees’ fees* | | | 118 | |
Miscellaneous | | | 7,677 | |
Total liabilities | | | 372,935 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 5,029,667 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 5,844,212 | |
Total distributable earnings (loss) | | | (814,545 | ) |
Net assets | | $ | 5,029,667 | |
| | | | | |
Investor Class: |
Net assets | | $ | 2,838,791 | |
Capital shares outstanding | | | 53,549 | |
Net asset value per share | | $ | 53.01 | |
| | | | | |
A-Class: |
Net assets | | $ | 816,383 | |
Capital shares outstanding | | | 16,863 | |
Net asset value per share | | $ | 48.41 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 50.82 | |
| | | | | |
C-Class: |
Net assets | | $ | 398,354 | |
Capital shares outstanding | | | 9,386 | |
Net asset value per share | | $ | 42.44 | |
| | | | | |
H-Class: |
Net assets | | $ | 976,139 | |
Capital shares outstanding | | | 20,763 | |
Net asset value per share | | $ | 47.01 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1,397) | | $ | 255,899 | |
Interest | | | 1,801 | |
Income from securities lending, net | | | 1,382 | |
Total investment income | | | 259,082 | |
| | | | | |
Expenses: |
Management fees | | | 135,502 | |
Distribution and service fees: |
A-Class | | | 3,149 | |
C-Class | | | 5,987 | |
H-Class | | | 6,374 | |
Transfer agent and administrative fees | | | 40,440 | |
Portfolio accounting fees | | | 15,941 | |
Registration fees | | | 14,087 | |
Professional fees | | | 7,108 | |
Trustees’ fees* | | | 3,658 | |
Custodian fees | | | 2,463 | |
Line of credit fees | | | 114 | |
Miscellaneous | | | 16,120 | |
Total expenses | | | 250,943 | |
Net investment income | | | 8,139 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 2,615,962 | |
Net realized gain | | | 2,615,962 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (4,127,911 | ) |
Net change in unrealized appreciation (depreciation) | | | (4,127,911 | ) |
Net realized and unrealized loss | | | (1,511,949 | ) |
Net decrease in net assets resulting from operations | | $ | (1,503,810 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
98 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 8,139 | | | $ | 41,239 | |
Net realized gain on investments | | | 2,615,962 | | | | 1,581,983 | |
Net change in unrealized appreciation (depreciation) on investments | | | (4,127,911 | ) | | | (249,813 | ) |
Net increase (decrease) in net assets resulting from operations | | | (1,503,810 | ) | | | 1,373,409 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (32,961 | ) | | | (544,748 | ) |
A-Class | | | (2,491 | ) | | | (159,698 | ) |
C-Class | | | (1,724 | ) | | | (75,803 | ) |
H-Class | | | (3,983 | ) | | | (112,344 | ) |
Total distributions to shareholders | | | (41,159 | ) | | | (892,593 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 42,468,953 | | | | 38,144,920 | |
A-Class | | | 2,130,439 | | | | 2,186,461 | |
C-Class | | | 73,859 | | | | 101,371 | |
H-Class | | | 14,647,439 | | | | 46,226,618 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 32,394 | | | | 530,279 | |
A-Class | | | 2,404 | | | | 139,178 | |
C-Class | | | 1,724 | | | | 75,270 | |
H-Class | | | 3,946 | | | | 111,434 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (50,743,318 | ) | | | (42,002,040 | ) |
A-Class | | | (2,347,132 | ) | | | (4,372,624 | ) |
C-Class | | | (372,260 | ) | | | (630,920 | ) |
H-Class | | | (14,108,477 | ) | | | (47,422,116 | ) |
Net decrease from capital share transactions | | | (8,210,029 | ) | | | (6,912,169 | ) |
Net decrease in net assets | | | (9,754,998 | ) | | | (6,431,353 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 14,784,665 | | | | 21,216,018 | |
End of year | | $ | 5,029,667 | | | $ | 14,784,665 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 587,907 | | | | 540,063 | |
A-Class | | | 33,729 | | | | 33,355 | |
C-Class | | | 1,552 | | | | 1,663 | |
H-Class | | | 226,956 | | | | 724,014 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 440 | | | | 8,323 | |
A-Class | | | 36 | | | | 2,384 | |
C-Class | | | 29 | | | | 1,456 | |
H-Class | | | 60 | | | | 1,965 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (704,990 | ) | | | (583,497 | ) |
A-Class | | | (35,774 | ) | | | (68,076 | ) |
C-Class | | | (6,497 | ) | | | (10,981 | ) |
H-Class | | | (223,449 | ) | | | (738,591 | ) |
Net decrease in shares | | | (120,001 | ) | | | (87,922 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 99 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 68.98 | | | $ | 71.23 | | | $ | 70.95 | | | $ | 61.36 | | | $ | 60.75 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .08 | | | | .32 | | | | .36 | | | | .52 | | | | .22 | |
Net gain (loss) on investments (realized and unrealized) | | | (15.86 | ) | | | 2.18 | | | | 4.48 | | | | 9.38 | | | | .82 | |
Total from investment operations | | | (15.78 | ) | | | 2.50 | | | | 4.84 | | | | 9.90 | | | | 1.04 | |
Less distributions from: |
Net investment income | | | (.19 | ) | | | (.52 | ) | | | (1.64 | ) | | | (.31 | ) | | | (.32 | ) |
Net realized gains | | | — | | | | (4.23 | ) | | | (2.92 | ) | | | — | | | | (.11 | ) |
Total distributions | | | (.19 | ) | | | (4.75 | ) | | | (4.56 | ) | | | (.31 | ) | | | (.43 | ) |
Net asset value, end of period | | $ | 53.01 | | | $ | 68.98 | | | $ | 71.23 | | | $ | 70.95 | | | $ | 61.36 | |
|
Total Return | | | (22.96 | %) | | | 4.06 | % | | | 6.71 | % | | | 16.20 | % | | | 1.72 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,839 | | | $ | 11,739 | | | $ | 14,625 | | | $ | 14,413 | | | $ | 15,173 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.11 | % | | | 0.45 | % | | | 0.49 | % | | | 0.81 | % | | | 0.35 | % |
Total expenses | | | 1.48 | % | | | 1.46 | % | | | 1.38 | % | | | 1.38 | % | | | 1.34 | % |
Portfolio turnover rate | | | 369 | % | | | 323 | % | | | 442 | % | | | 352 | % | | | 339 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 63.17 | | | $ | 65.82 | | | $ | 66.03 | | | $ | 57.27 | | | $ | 56.88 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .01 | | | | .11 | | | | .17 | | | | .23 | | | | .08 | |
Net gain (loss) on investments (realized and unrealized) | | | (14.58 | ) | | | 1.99 | | | | 4.18 | | | | 8.84 | | | | .74 | |
Total from investment operations | | | (14.57 | ) | | | 2.10 | | | | 4.35 | | | | 9.07 | | | | .82 | |
Less distributions from: |
Net investment income | | | (.19 | ) | | | (.52 | ) | | | (1.64 | ) | | | (.31 | ) | | | (.32 | ) |
Net realized gains | | | — | | | | (4.23 | ) | | | (2.92 | ) | | | — | | | | (.11 | ) |
Total distributions | | | (.19 | ) | | | (4.75 | ) | | | (4.56 | ) | | | (.31 | ) | | | (.43 | ) |
Net asset value, end of period | | $ | 48.41 | | | $ | 63.17 | | | $ | 65.82 | | | $ | 66.03 | | | $ | 57.27 | |
|
Total Returnb | | | (23.15 | %) | | | 3.79 | % | | | 6.46 | % | | | 15.91 | % | | | 1.45 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 816 | | | $ | 1,192 | | | $ | 3,371 | | | $ | 2,180 | | | $ | 7,990 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.02 | % | | | 0.17 | % | | | 0.24 | % | | | 0.40 | % | | | 0.15 | % |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.60 | % |
Portfolio turnover rate | | | 369 | % | | | 323 | % | | | 442 | % | | | 352 | % | | | 339 | % |
100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 55.82 | | | $ | 59.16 | | | $ | 60.23 | | | $ | 52.65 | | | $ | 52.72 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.42 | ) | | | (.32 | ) | | | (.36 | ) | | | (.18 | ) | | | (.28 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (12.77 | ) | | | 1.73 | | | | 3.85 | | | | 8.07 | | | | .64 | |
Total from investment operations | | | (13.19 | ) | | | 1.41 | | | | 3.49 | | | | 7.89 | | | | .36 | |
Less distributions from: |
Net investment income | | | (.19 | ) | | | (.52 | ) | | | (1.64 | ) | | | (.31 | ) | | | (.32 | ) |
Net realized gains | | | — | | | | (4.23 | ) | | | (2.92 | ) | | | — | | | | (.11 | ) |
Total distributions | | | (.19 | ) | | | (4.75 | ) | | | (4.56 | ) | | | (.31 | ) | | | (.43 | ) |
Net asset value, end of period | | $ | 42.44 | | | $ | 55.82 | | | $ | 59.16 | | | $ | 60.23 | | | $ | 52.65 | |
|
Total Returnb | | | (23.73 | %) | | | 3.03 | % | | | 5.66 | % | | | 15.05 | % | | | 0.69 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 398 | | | $ | 798 | | | $ | 1,311 | | | $ | 1,327 | | | $ | 1,353 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.74 | %) | | | (0.56 | %) | | | (0.58 | %) | | | (0.33 | %) | | | (0.54 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 369 | % | | | 323 | % | | | 442 | % | | | 352 | % | | | 339 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 61.36 | | | $ | 64.06 | | | $ | 64.38 | | | $ | 55.85 | | | $ | 55.50 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.01 | ) | | | (.29 | ) | | | .07 | | | | .20 | | | | .27 | |
Net gain (loss) on investments (realized and unrealized) | | | (14.15 | ) | | | 2.34 | | | | 4.17 | | | | 8.64 | | | | .51 | |
Total from investment operations | | | (14.16 | ) | | | 2.05 | | | | 4.24 | | | | 8.84 | | | | .78 | |
Less distributions from: |
Net investment income | | | (.19 | ) | | | (.52 | ) | | | (1.64 | ) | | | (.31 | ) | | | (.32 | ) |
Net realized gains | | | — | | | | (4.23 | ) | | | (2.92 | ) | | | — | | | | (.11 | ) |
Total distributions | | | (.19 | ) | | | (4.75 | ) | | | (4.56 | ) | | | (.31 | ) | | | (.43 | ) |
Net asset value, end of period | | $ | 47.01 | | | $ | 61.36 | | | $ | 64.06 | | | $ | 64.38 | | | $ | 55.85 | |
|
Total Return | | | (23.17 | %) | | | 3.81 | % | | | 6.45 | % | | | 15.90 | % | | | 1.41 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 976 | | | $ | 1,055 | | | $ | 1,910 | | | $ | 3,769 | | | $ | 13,212 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.01 | %) | | | (0.45 | %) | | | 0.10 | % | | | 0.34 | % | | | 0.49 | % |
Total expenses | | | 1.72 | % | | | 1.69 | % | | | 1.63 | % | | | 1.63 | % | | | 1.64 | % |
Portfolio turnover rate | | | 369 | % | | | 323 | % | | | 442 | % | | | 352 | % | | | 339 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The Financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 101 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
PRECIOUS METALS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in U.S. and foreign companies that are involved in the precious metals sector, including exploration, mining, production and development, and other precious metals-related services (“Precious Metals Companies”).
For the one-year period ended March 31, 2020, Precious Metals Fund Investor Class returned 3.65%, compared with -16.57% for the S&P 500 Materials Index. The broader S&P 500 Index returned -6.98%.
The gold industry was the only contributor to return. The copper and silver industries detracted the most from return.
Barrick Gold Corp., Newmont Corp., and Franco-Nevada Corp. contributed the most to the Fund’s return for the period. Freeport-McMoRan, Inc., Harmony Gold Mining Co. Ltd. ADR, and Osisko Gold Royalties Ltd. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | December 1, 1993 |
A-Class | September 1, 2004 |
C-Class | April 27, 2001 |
H-Class | August 1, 2003 |
Ten Largest Holdings (% of Total Net Assets) |
Newmont Corp. | 11.1% |
Barrick Gold Corp. | 10.1% |
Franco-Nevada Corp. | 7.6% |
Wheaton Precious Metals Corp. | 6.0% |
Agnico Eagle Mines Ltd. | 4.4% |
AngloGold Ashanti Ltd. ADR | 4.1% |
Freeport-McMoRan, Inc. | 3.9% |
Kinross Gold Corp. | 3.7% |
Kirkland Lake Gold Ltd. | 3.6% |
VanEck Vectors Junior Gold Miners ETF | 3.6% |
Top Ten Total | 58.1% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
102 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | 3.65% | 3.89% | (6.17%) |
A-Class Shares | 3.39% | 3.62% | (6.41%) |
A-Class Shares with sales charge‡ | (1.52%) | 2.62% | (6.87%) |
C-Class Shares | 2.65% | 2.87% | (7.10%) |
C-Class Shares with CDSC§ | 1.65% | 2.87% | (7.10%) |
H-Class Shares** | 3.46% | 3.57% | (6.54%) |
S&P 500 Materials Index | (16.57%) | 0.57% | 5.57% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Materials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 103 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
PRECIOUS METALS FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 95.9% |
| | | | | | | | | |
Mining - 95.9% |
Newmont Corp. | | | 153,248 | | | $ | 6,939,069 | |
Barrick Gold Corp. | | | 344,575 | | | | 6,312,614 | |
Franco-Nevada Corp. | | | 47,426 | | | | 4,719,836 | |
Wheaton Precious Metals Corp. | | | 136,089 | | | | 3,746,530 | |
Agnico Eagle Mines Ltd. | | | 69,228 | | | | 2,754,582 | |
AngloGold Ashanti Ltd. ADR | | | 153,883 | | | | 2,559,074 | |
Freeport-McMoRan, Inc. | | | 360,817 | | | | 2,435,515 | |
Kinross Gold Corp.* | | | 581,527 | | | | 2,314,478 | |
Kirkland Lake Gold Ltd.1 | | | 76,879 | | | | 2,275,618 | |
Royal Gold, Inc. | | | 25,830 | | | | 2,265,549 | |
Gold Fields Ltd. ADR | | | 399,023 | | | | 1,895,359 | |
B2Gold Corp. | | | 575,336 | | | | 1,760,528 | |
Novagold Resources, Inc.* | | | 224,868 | | | | 1,659,526 | |
Yamana Gold, Inc.1 | | | 557,664 | | | | 1,533,576 | |
Pan American Silver Corp. | | | 105,740 | | | | 1,515,254 | |
Alamos Gold, Inc. — Class A | | | 294,188 | | | | 1,470,940 | |
Sibanye Stillwater Ltd. ADR*,1 | | | 282,937 | | | | 1,335,463 | |
Osisko Gold Royalties Ltd.1 | | | 142,426 | | | | 1,059,649 | |
SSR Mining, Inc.* | | | 92,312 | | | | 1,050,511 | |
Eldorado Gold Corp.* | | | 161,430 | | | | 996,023 | |
Harmony Gold Mining Company Ltd. ADR*,1 | | | 433,232 | | | | 944,446 | |
IAMGOLD Corp.* | | | 403,978 | | | | 921,070 | |
First Majestic Silver Corp.* | | | 148,556 | | | | 919,562 | |
Sandstorm Gold Ltd.* | | | 170,977 | | | | 856,595 | |
Pretium Resources, Inc.*,1 | | | 144,500 | | | | 819,315 | |
Hecla Mining Co. | | | 443,511 | | | | 807,190 | |
MAG Silver Corp.* | | | 98,399 | | | | 755,704 | |
Seabridge Gold, Inc.*,1 | | | 76,174 | | | | 712,227 | |
Silvercorp Metals, Inc. | | | 198,172 | | | | 648,022 | |
Coeur Mining, Inc.* | | | 199,479 | | | | 640,328 | |
Fortuna Silver Mines, Inc.*,1 | | | 237,076 | | | | 547,646 | |
Endeavour Silver Corp.*,1 | | | 273,816 | | | | 366,913 | |
Gold Resource Corp. | | | 123,507 | | | | 339,644 | |
Total Mining | | | | | | | 59,878,356 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $50,492,787) | | | | | | | 59,878,356 | |
| | | | | | | | | |
EXCHANGE-TRADED FUNDS† - 3.6% |
VanEck Vectors Junior Gold Miners ETF | | | 80,753 | | | | 2,269,159 | |
Total Exchange-Traded Funds | | | | |
(Cost $2,277,227) | | | | | | | 2,269,159 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.7% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 300,880 | | | | 300,880 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 115,723 | | | | 115,723 | |
Total Repurchase Agreements | | | | |
(Cost $416,603) | | | | | | | 416,603 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 6.7% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 4,212,644 | | | | 4,212,644 | |
Total Securities Lending Collateral | | | | |
(Cost $4,212,644) | | | | | | | 4,212,644 | |
| | | | | | | | | |
Total Investments - 106.9% | | | | |
(Cost $57,399,261) | | $ | 66,776,762 | |
Other Assets & Liabilities, net - (6.9)% | | | (4,304,968 | ) |
Total Net Assets - 100.0% | | $ | 62,471,794 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | |
| | See Sector Classification in Other Information section. |
104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
PRECIOUS METALS FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 59,878,356 | | | $ | — | | | $ | — | | | $ | 59,878,356 | |
Exchange-Traded Funds | | | 2,269,159 | | | | — | | | | — | | | | 2,269,159 | |
Repurchase Agreements | | | — | | | | 416,603 | | | | — | | | | 416,603 | |
Securities Lending Collateral | | | 4,212,644 | | | | — | | | | — | | | | 4,212,644 | |
Total Assets | | $ | 66,360,159 | | | $ | 416,603 | | | $ | — | | | $ | 66,776,762 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 105 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $3,888,207 of securities loaned (cost $56,982,658) | | $ | 66,360,159 | |
Repurchase agreements, at value (cost $416,603) | | | 416,603 | |
Cash | | | 338,004 | |
Receivables: |
Fund shares sold | | | 868,987 | |
Securities sold | | | 844,765 | |
Dividends | | | 44,556 | |
Foreign tax reclaims | | | 5,434 | |
Securities lending income | | | 4,484 | |
Total assets | | | 68,882,992 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 4,212,644 | |
Fund shares redeemed | | | 1,735,137 | |
Deferred foreign capital gain taxes | | | 276,532 | |
Management fees | | | 46,198 | |
Transfer agent and administrative fees | | | 19,613 | |
Portfolio accounting fees | | | 6,160 | |
Distribution and service fees | | | 5,035 | |
Trustees’ fees* | | | 1,685 | |
Miscellaneous | | | 108,194 | |
Total liabilities | | | 6,411,198 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 62,471,794 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 116,683,538 | |
Total distributable earnings (loss) | | | (54,211,744 | ) |
Net assets | | $ | 62,471,794 | |
| | | | | |
Investor Class: |
Net assets | | $ | 46,153,174 | |
Capital shares outstanding | | | 1,741,307 | |
Net asset value per share | | $ | 26.50 | |
| | | | | |
A-Class: |
Net assets | | $ | 12,802,848 | |
Capital shares outstanding | | | 509,220 | |
Net asset value per share | | $ | 25.14 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 26.39 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,685,779 | |
Capital shares outstanding | | | 79,650 | |
Net asset value per share | | $ | 21.16 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,829,993 | |
Capital shares outstanding | | | 75,293 | |
Net asset value per share | | $ | 24.30 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $65,157) | | $ | 737,776 | |
Interest | | | 14,577 | |
Income from securities lending, net | | | 24,511 | |
Total investment income | | | 776,864 | |
| | | | | |
Expenses: |
Management fees | | | 601,942 | |
Distribution and service fees: |
A-Class | | | 40,492 | |
C-Class | | | 24,648 | |
H-Class | | | 8,934 | |
Transfer agent and administrative fees | | | 204,861 | |
Portfolio accounting fees | | | 80,258 | |
Professional fees | | | 39,519 | |
Trustees’ fees* | | | 15,871 | |
Custodian fees | | | 11,441 | |
Line of credit fees | | | 13 | |
Miscellaneous | | | 150,765 | |
Total expenses | | | 1,178,744 | |
Net investment loss | | | (401,880 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 395,134 | |
Net realized gain | | | 395,134 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (1,122,240 | ) |
Net change in unrealized appreciation (depreciation) | | | (1,122,240 | ) |
Net realized and unrealized loss | | | (727,106 | ) |
Net decrease in net assets resulting from operations | | $ | (1,128,986 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
106 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (401,880 | ) | | $ | (315,529 | ) |
Net realized gain (loss) on investments | | | 395,134 | | | | (11,808,144 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (1,122,240 | ) | | | 7,296,954 | |
Net decrease in net assets resulting from operations | | | (1,128,986 | ) | | | (4,826,719 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (1,495,304 | ) | | | (375,623 | ) |
A-Class | | | (408,150 | ) | | | (174,388 | ) |
C-Class | | | (74,684 | ) | | | (41,752 | ) |
H-Class | | | (76,974 | ) | | | (26,797 | ) |
Total distributions to shareholders | | | (2,055,112 | ) | | | (618,560 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 345,983,213 | | | | 241,203,549 | |
A-Class | | | 5,044,797 | | | | 7,901,916 | |
C-Class | | | 2,843,601 | | | | 2,271,183 | |
H-Class | | | 27,234,035 | | | | 139,186,676 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 1,474,406 | | | | 361,878 | |
A-Class | | | 401,562 | | | | 171,857 | |
C-Class | | | 73,474 | | | | 41,057 | |
H-Class | | | 76,042 | | | | 25,498 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (331,255,162 | ) | | | (239,242,751 | ) |
A-Class | | | (7,292,781 | ) | | | (5,992,947 | ) |
C-Class | | | (3,692,608 | ) | | | (6,279,462 | ) |
H-Class | | | (28,223,011 | ) | | | (136,898,554 | ) |
Net increase from capital share transactions | | | 12,667,568 | | | | 2,749,900 | |
Net increase (decrease) in net assets | | | 9,483,470 | | | | (2,695,379 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 52,988,324 | | | | 55,683,703 | |
End of year | | $ | 62,471,794 | | | $ | 52,988,324 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 11,365,343 | | | | 9,657,928 | |
A-Class | | | 183,721 | | | | 322,537 | |
C-Class | | | 115,029 | | | | 112,787 | |
H-Class | | | 1,041,882 | | | | 6,003,655 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 44,117 | | | | 15,591 | |
A-Class | | | 12,660 | | | | 7,773 | |
C-Class | | | 2,746 | | | | 2,176 | |
H-Class | | | 2,479 | | | | 1,193 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (10,958,332 | ) | | | (9,638,186 | ) |
A-Class | | | (258,645 | ) | | | (253,204 | ) |
C-Class | | | (151,938 | ) | | | (302,237 | ) |
H-Class | | | (1,078,358 | ) | | | (5,985,054 | ) |
Net increase (decrease) in shares | | | 320,704 | | | | (55,041 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 26.14 | | | $ | 27.07 | | | $ | 30.82 | | | $ | 27.37 | | | $ | 25.11 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.12 | ) | | | (.12 | ) | | | (.17 | ) | | | (.23 | ) | | | (.07 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 1.23 | e | | | (.48 | ) | | | (1.96 | ) | | | 4.85 | | | | 2.44 | |
Total from investment operations | | | 1.11 | | | | (.60 | ) | | | (2.13 | ) | | | 4.62 | | | | 2.37 | |
Less distributions from: |
Net investment income | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Total distributions | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Net asset value, end of period | | $ | 26.50 | | | $ | 26.14 | | | $ | 27.07 | | | $ | 30.82 | | | $ | 27.37 | |
|
Total Return | | | 3.65 | % | | | (2.08 | %) | | | (6.98 | %) | | | 16.91 | % | | | 9.67 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 46,153 | | | $ | 33,724 | | | $ | 33,968 | | | $ | 43,530 | | | $ | 49,321 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.40 | %) | | | (0.47 | %) | | | (0.57 | %) | | | (0.67 | %) | | | (0.31 | %) |
Total expensesb | | | 1.38 | % | | | 1.39 | % | | | 1.28 | % | | | 1.27 | % | | | 1.25 | % |
Portfolio turnover rate | | | 277 | % | | | 571 | % | | | 630 | % | | | 508 | % | | | 797 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 24.89 | | | $ | 25.85 | | | $ | 29.59 | | | $ | 26.39 | | | $ | 24.28 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.19 | ) | | | (.17 | ) | | | (.22 | ) | | | (.27 | ) | | | (.12 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 1.19 | e | | | (.46 | ) | | | (1.90 | ) | | | 4.64 | | | | 2.34 | |
Total from investment operations | | | 1.00 | | | | (.63 | ) | | | (2.12 | ) | | | 4.37 | | | | 2.22 | |
Less distributions from: |
Net investment income | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Total distributions | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Net asset value, end of period | | $ | 25.14 | | | $ | 24.89 | | | $ | 25.85 | | | $ | 29.59 | | | $ | 26.39 | |
|
Total Returnc | | | 3.39 | % | | | (2.30 | %) | | | (7.24 | %) | | | 16.59 | % | | | 9.38 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 12,803 | | | $ | 14,222 | | | $ | 12,781 | | | $ | 12,085 | | | $ | 3,711 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.67 | %) | | | (0.73 | %) | | | (0.79 | %) | | | (0.82 | %) | | | (0.54 | %) |
Total expensesb | | | 1.63 | % | | | 1.64 | % | | | 1.53 | % | | | 1.52 | % | | | 1.50 | % |
Portfolio turnover rate | | | 277 | % | | | 571 | % | | | 630 | % | | | 508 | % | | | 797 | % |
108 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 21.19 | | | $ | 22.24 | | | $ | 25.89 | | | $ | 23.38 | | | $ | 21.67 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.35 | ) | | | (.32 | ) | | | (.39 | ) | | | (.46 | ) | | | (.26 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 1.07 | e | | | (.40 | ) | | | (1.64 | ) | | | 4.14 | | | | 2.08 | |
Total from investment operations | | | .72 | | | | (.72 | ) | | | (2.03 | ) | | | 3.68 | | | | 1.82 | |
Less distributions from: |
Net investment income | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Total distributions | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Net asset value, end of period | | $ | 21.16 | | | $ | 21.19 | | | $ | 22.24 | | | $ | 25.89 | | | $ | 23.38 | |
|
Total Returnc | | | 2.65 | % | | | (3.08 | %) | | | (7.95 | %) | | | 15.76 | % | | | 8.66 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,686 | | | $ | 2,412 | | | $ | 6,697 | | | $ | 7,607 | | | $ | 6,825 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.41 | %) | | | (1.53 | %) | | | (1.56 | %) | | | (1.59 | %) | | | (1.34 | %) |
Total expensesb | | | 2.38 | % | | | 2.37 | % | | | 2.28 | % | | | 2.27 | % | | | 2.25 | % |
Portfolio turnover rate | | | 277 | % | | | 571 | % | | | 630 | % | | | 508 | % | | | 797 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016d | |
Per Share Data |
Net asset value, beginning of period | | $ | 24.06 | | | $ | 25.02 | | | $ | 28.73 | | | $ | 25.64 | | | $ | 23.64 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.22 | ) | | | (.18 | ) | | | (.25 | ) | | | (.31 | ) | | | (.11 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 1.21 | e | | | (.45 | ) | | | (1.84 | ) | | | 4.57 | | | | 2.22 | |
Total from investment operations | | | .99 | | | | (.63 | ) | | | (2.09 | ) | | | 4.26 | | | | 2.11 | |
Less distributions from: |
Net investment income | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Total distributions | | | (.75 | ) | | | (.33 | ) | | | (1.62 | ) | | | (1.17 | ) | | | (.11 | ) |
Net asset value, end of period | | $ | 24.30 | | | $ | 24.06 | | | $ | 25.02 | | | $ | 28.73 | | | $ | 25.64 | |
|
Total Return | | | 3.46 | % | | | (2.33 | %) | | | (7.36 | %) | | | 16.65 | % | | | 9.17 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,830 | | | $ | 2,630 | | | $ | 2,239 | | | $ | 2,954 | | | $ | 2,556 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.78 | %) | | | (0.78 | %) | | | (0.92 | %) | | | (0.94 | %) | | | (0.53 | %) |
Total expensesb | | | 1.63 | % | | | 1.63 | % | | | 1.53 | % | | | 1.52 | % | | | 1.59 | % |
Portfolio turnover rate | | | 277 | % | | | 571 | % | | | 630 | % | | | 508 | % | | | 797 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Does not include expenses of the underlying funds in which the Fund invests. |
c | Total return does not reflect the impact of any applicable sales charges. |
d | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
e | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and repurchase of fund shares in relation to fluctuating market value of the investments of the Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 109 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
REAL ESTATE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the real estate industry, including real estate investment trusts (“REITs”) (collectively, “Real Estate Companies”).
For the one-year period ended March 31, 2020, Real Estate Fund H-Class returned -24.27%, compared with -20.99% for the MSCI U.S. REIT Index. The broader S&P 500 Index returned -6.98%.
Industrial REITs was the only contributor to return. Retail REITs, residential REITs, and mortgage REITs detracted the most from return.
Equinix, Inc., Prologis, Inc., and SBA Communications Corp. contributed the most to the Fund’s return for the period. Simon Property Group, Inc., New Residential Investment Corp., and Macerich Co. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | September 1, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
Ten Largest Holdings (% of Total Net Assets) |
Prologis, Inc. | 4.3% |
American Tower Corp. — Class A | 4.2% |
Crown Castle International Corp. | 3.5% |
Equinix, Inc. | 3.4% |
Digital Realty Trust, Inc. | 2.6% |
SBA Communications Corp. | 2.6% |
Public Storage | 2.5% |
Equity Residential | 1.9% |
AvalonBay Communities, Inc. | 1.7% |
Alexandria Real Estate Equities, Inc. | 1.6% |
Top Ten Total | 28.3% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
110 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (24.28%) | (2.34%) | 4.62% |
A-Class Shares with sales charge‡ | (27.89%) | (3.28%) | 4.11% |
C-Class Shares | (24.86%) | (3.08%) | 3.80% |
C-Class Shares with CDSC§ | (25.60%) | (3.08%) | 3.80% |
H-Class Shares** | (24.27%) | (2.33%) | 4.60% |
MSCI U.S. REIT Index | (20.99%) | (0.42%) | 7.43% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and MSCI U.S. REIT Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on H-Class shares and A-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 111 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
REAL ESTATE FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.6% |
| | | | | | | | | |
REITs - 96.5% |
REITs-DIVERSIFIED - 26.6% |
American Tower Corp. — Class A | | | 682 | | | $ | 148,506 | |
Crown Castle International Corp. | | | 840 | | | | 121,296 | |
Equinix, Inc. | | | 188 | | | | 117,419 | |
Digital Realty Trust, Inc. | | | 659 | | | | 91,542 | |
SBA Communications Corp. | | | 335 | | | | 90,440 | |
Duke Realty Corp. | | | 1,609 | | | | 52,099 | |
WP Carey, Inc. | | | 731 | | | | 42,456 | |
Weyerhaeuser Co. | | | 2,445 | | | | 41,443 | |
CoreSite Realty Corp. | | | 320 | | | | 37,088 | |
VICI Properties, Inc. | | | 2,088 | | | | 34,744 | |
Gaming and Leisure Properties, Inc. | | | 1,092 | | | | 30,259 | |
Vornado Realty Trust | | | 822 | | | | 29,765 | |
Lamar Advertising Co. — Class A | | | 522 | | | | 26,768 | |
PotlatchDeltic Corp. | | | 601 | | | | 18,865 | |
Outfront Media, Inc. | | | 1,161 | | | | 15,650 | |
New Residential Investment Corp. | | | 2,582 | | | | 12,936 | |
EPR Properties | | | 517 | | | | 12,522 | |
Total REITs-Diversified | | | | | | | 923,798 | |
| | | | | | | | | |
REITs-APARTMENTS - 12.7% |
Equity Residential | | | 1,058 | | | | 65,289 | |
AvalonBay Communities, Inc. | | | 403 | | | | 59,310 | |
Essex Property Trust, Inc. | | | 230 | | | | 50,655 | |
Mid-America Apartment Communities, Inc. | | | 461 | | | | 47,497 | |
UDR, Inc. | | | 1,236 | | | | 45,163 | |
Invitation Homes, Inc. | | | 2,098 | | | | 44,834 | |
American Homes 4 Rent — Class A | | | 1,681 | | | | 38,999 | |
Camden Property Trust | | | 471 | | | | 37,322 | |
Apartment Investment & Management Co. — Class A | | | 841 | | | | 29,561 | |
American Campus Communities, Inc. | | | 850 | | | | 23,588 | |
Total REITs-Apartments | | | | | | | 442,218 | |
| | | | | | | | | |
REITs-WAREHOUSE/INDUSTRIES - 10.9% |
Prologis, Inc. | | | 1,867 | | | | 150,051 | |
CyrusOne, Inc. | | | 649 | | | | 40,076 | |
Americold Realty Trust | | | 1,160 | | | | 39,486 | |
Rexford Industrial Realty, Inc. | | | 773 | | | | 31,701 | |
QTS Realty Trust, Inc. — Class A | | | 512 | | | | 29,701 | |
First Industrial Realty Trust, Inc. | | | 868 | | | | 28,844 | |
EastGroup Properties, Inc. | | | 265 | | | | 27,687 | |
STAG Industrial, Inc. | | | 1,022 | | | | 23,015 | |
Innovative Industrial Properties, Inc.1 | | | 197 | | | | 14,958 | |
Total REITs-Warehouse/Industries | | | | | | | 385,519 | |
| | | | | | | | | |
REITs-OFFICE PROPERTY - 10.0% |
Alexandria Real Estate Equities, Inc. | | | 416 | | | | 57,017 | |
Boston Properties, Inc. | | | 525 | | | | 48,421 | |
Kilroy Realty Corp. | | | 558 | | | | 35,545 | |
Douglas Emmett, Inc. | | | 981 | | | | 29,930 | |
JBG SMITH Properties | | | 898 | | | | 28,583 | |
Cousins Properties, Inc. | | | 934 | | | | 27,338 | |
Hudson Pacific Properties, Inc. | | | 1,022 | | | | 25,918 | |
Highwoods Properties, Inc. | | | 726 | | | | 25,715 | |
SL Green Realty Corp. | | | 465 | | | | 20,042 | |
Paramount Group, Inc. | | | 1,991 | | | | 17,521 | |
Brandywine Realty Trust | | | 1,645 | | | | 17,305 | |
Empire State Realty Trust, Inc. — Class A | | | 1,773 | | | | 15,886 | |
Total REITs-Office Property | | | | | | | 349,221 | |
| | | | | | | | | |
REITs-HEALTH CARE - 9.1% |
Welltower, Inc. | | | 1,110 | | | | 50,816 | |
Healthpeak Properties, Inc. | | | 1,924 | | | | 45,887 | |
Medical Properties Trust, Inc. | | | 2,466 | | | | 42,637 | |
Ventas, Inc. | | | 1,256 | | | | 33,661 | |
Healthcare Trust of America, Inc. — Class A | | | 1,288 | | | | 31,273 | |
Omega Healthcare Investors, Inc. | | | 1,122 | | | | 29,778 | |
Healthcare Realty Trust, Inc. | | | 989 | | | | 27,623 | |
Physicians Realty Trust | | | 1,548 | | | | 21,579 | |
Sabra Health Care REIT, Inc. | | | 1,508 | | | | 16,467 | |
CareTrust REIT, Inc. | | | 1,054 | | | | 15,589 | |
Total REITs-Health Care | | | | | | | 315,310 | |
| | | | | | | | | |
REITs-STORAGE - 6.8% |
Public Storage | | | 447 | | | | 88,779 | |
Extra Space Storage, Inc. | | | 549 | | | | 52,572 | |
Iron Mountain, Inc. | | | 1,474 | | | | 35,081 | |
CubeSmart | | | 1,218 | | | | 32,630 | |
Life Storage, Inc. | | | 324 | | | | 30,634 | |
Total REITs-Storage | | | | | | | 239,696 | |
| | | | | | | | | |
REITs-HOTELS - 4.9% |
MGM Growth Properties LLC — Class A | | | 1,580 | | | | 37,399 | |
Host Hotels & Resorts, Inc. | | | 3,041 | | | | 33,573 | |
Sunstone Hotel Investors, Inc. | | | 1,949 | | | | 16,976 | |
Apple Hospitality REIT, Inc. | | | 1,831 | | | | 16,790 | |
Ryman Hospitality Properties, Inc. | | | 393 | | | | 14,089 | |
Park Hotels & Resorts, Inc. | | | 1,492 | | | | 11,802 | |
Pebblebrook Hotel Trust | | | 1,068 | | | | 11,631 | |
RLJ Lodging Trust | | | 1,505 | | | | 11,619 | |
DiamondRock Hospitality Co. | | | 2,055 | | | | 10,439 | |
Service Properties Trust | | | 1,288 | | | | 6,955 | |
Total REITs-Hotels | | | | | | | 171,273 | |
| | | | | | | | | |
REITs-SHOPPING CENTERS - 4.1% |
Regency Centers Corp. | | | 805 | | | | 30,936 | |
Federal Realty Investment Trust | | | 379 | | | | 28,277 | |
Kimco Realty Corp. | | | 2,234 | | | | 21,603 | |
Brixmor Property Group, Inc. | | | 1,830 | | | | 17,385 | |
Weingarten Realty Investors | | | 1,004 | | | | 14,488 | |
Urban Edge Properties | | | 1,245 | | | | 10,968 | |
Retail Opportunity Investments Corp. | | | 1,273 | | | | 10,553 | |
Retail Properties of America, Inc. — Class A | | | 1,955 | | | | 10,107 | |
Total REITs-Shopping Centers | | | | | | | 144,317 | |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
REAL ESTATE FUND | |
| | Shares | | | Value | |
REITs-SINGLE TENANT - 3.7% |
Realty Income Corp. | | | 1,042 | | | $ | 51,954 | |
National Retail Properties, Inc. | | | 890 | | | | 28,649 | |
STORE Capital Corp. | | | 1,240 | | | | 22,469 | |
Spirit Realty Capital, Inc. | | | 704 | | | | 18,410 | |
Essential Properties Realty Trust, Inc. | | | 896 | | | | 11,702 | |
Total REITs-Single Tenant | | | | | | | 133,184 | |
| | | | | | | | | |
REITs-MORTGAGE - 3.3% |
Annaly Capital Management, Inc. | | | 6,024 | | | | 30,542 | |
AGNC Investment Corp. | | | 2,721 | | | | 28,788 | |
Blackstone Mortgage Trust, Inc. — Class A | | | 927 | | | | 17,261 | |
Starwood Property Trust, Inc. | | | 1,648 | | | | 16,892 | |
Chimera Investment Corp. | | | 1,463 | | | | 13,313 | |
Two Harbors Investment Corp. | | | 2,100 | | | | 8,001 | |
Total REITs-Mortgage | | | | | | | 114,797 | |
| | | | | | | | | |
REITs-MANUFACTURED HOMES - 2.7% |
Sun Communities, Inc. | | | 390 | | | | 48,692 | |
Equity LifeStyle Properties, Inc. | | | 802 | | | | 46,099 | |
Total REITs-Manufactured Homes | | | | | | | 94,791 | |
| | | | | | | | | |
REITs-REGIONAL MALLS - 1.7% |
Simon Property Group, Inc. | | | 713 | | | | 39,115 | |
Brookfield Property REIT, Inc. — Class A1 | | | 929 | | | | 7,887 | |
Macerich Co. | | | 1,106 | | | | 6,227 | |
Tanger Factory Outlet Centers, Inc.1 | | | 1,235 | | | | 6,175 | |
Total REITs-Regional Malls | | | | | | | 59,404 | |
| | | | | | | | | |
Total REITs | | | | | | | 3,373,528 | |
| | | | | | | | | |
Real Estate - 3.1% |
Real Estate Management/Services - 1.4% |
Jones Lang LaSalle, Inc. | | | 271 | | | | 27,366 | |
Redfin Corp.* | | | 1,025 | | | | 15,805 | |
Realogy Holdings Corp. | | | 1,690 | | | | 5,087 | |
Total Real Estate Management/Services | | | | | | | 48,258 | |
Real Estate Services - 1.3% |
CBRE Group, Inc. — Class A* | | | 1,167 | | | | 44,007 | |
| | | | | | | | | |
Real Estate Operations/Development - 0.4% |
Howard Hughes Corp.* | | | 290 | | | | 14,651 | |
Total Real Estate | | | | | | | 106,916 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $3,904,351) | | | | | | | 3,480,444 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.7% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 18,547 | | | | 18,547 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 7,133 | | | | 7,133 | |
Total Repurchase Agreements | | | | |
(Cost $25,680) | | | | | | | 25,680 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 0.7% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 24,081 | | | | 24,081 | |
Total Securities Lending Collateral | | | | |
(Cost $24,081) | | | | | | | 24,081 | |
| | | | | | | | | |
Total Investments - 101.0% | | | | |
(Cost $3,954,112) | | $ | 3,530,205 | |
Other Assets & Liabilities, net - (1.0)% | | | (34,798 | ) |
Total Net Assets - 100.0% | | $ | 3,495,407 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
REAL ESTATE FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 3,480,444 | | | $ | — | | | $ | — | | | $ | 3,480,444 | |
Repurchase Agreements | | | — | | | | 25,680 | | | | — | | | | 25,680 | |
Securities Lending Collateral | | | 24,081 | | | | — | | | | — | | | | 24,081 | |
Total Assets | | $ | 3,504,525 | | | $ | 25,680 | | | $ | — | | | $ | 3,530,205 | |
114 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $22,369 of securities loaned (cost $3,928,432) | | $ | 3,504,525 | |
Repurchase agreements, at value (cost $25,680) | | | 25,680 | |
Cash | | | 20,588 | |
Receivables: |
Dividends | | | 23,029 | |
Securities sold | | | 20,675 | |
Fund shares sold | | | 602 | |
Securities lending income | | | 36 | |
Total assets | | | 3,595,135 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 60,009 | |
Return of securities lending collateral | | | 24,081 | |
Management fees | | | 3,706 | |
Distribution and service fees | | | 1,432 | |
Transfer agent and administrative fees | | | 1,415 | |
Portfolio accounting fees | | | 436 | |
Trustees’ fees* | | | 129 | |
Miscellaneous | | | 8,520 | |
Total liabilities | | | 99,728 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 3,495,407 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 10,169,180 | |
Total distributable earnings (loss) | | | (6,673,773 | ) |
Net assets | | $ | 3,495,407 | |
| | | | | |
A-Class: |
Net assets | | $ | 781,290 | |
Capital shares outstanding | | | 25,450 | |
Net asset value per share | | $ | 30.70 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 32.23 | |
| | | | | |
C-Class: |
Net assets | | $ | 429,728 | |
Capital shares outstanding | | | 16,227 | |
Net asset value per share | | $ | 26.48 | |
| | | | | |
H-Class: |
Net assets | | $ | 2,284,389 | |
Capital shares outstanding | | | 74,580 | |
Net asset value per share | | $ | 30.63 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 711,134 | |
Interest | | | 2,676 | |
Income from securities lending, net | | | 1,010 | |
Total investment income | | | 714,820 | |
| | | | | |
Expenses: |
Management fees | | | 200,564 | |
Distribution and service fees: |
A-Class | | | 2,278 | |
C-Class | | | 9,112 | |
H-Class | | | 54,433 | |
Transfer agent and administrative fees | | | 59,314 | |
Portfolio accounting fees | | | 23,595 | |
Registration fees | | | 20,893 | |
Professional fees | | | 10,018 | |
Trustees’ fees* | | | 6,417 | |
Printing fees | | | 6,396 | |
Pricing fees | | | 5,509 | |
Custodian fees | | | 3,405 | |
Line of credit fees | | | 184 | |
Miscellaneous | | | 10,576 | |
Total expenses | | | 412,694 | |
Net investment income | | | 302,126 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 1,681,715 | |
Net realized gain | | | 1,681,715 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (2,946,772 | ) |
Net change in unrealized appreciation (depreciation) | | | (2,946,772 | ) |
Net realized and unrealized loss | | | (1,265,057 | ) |
Net decrease in net assets resulting from operations | | $ | (962,931 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 302,126 | | | $ | 520,024 | |
Net realized gain (loss) on investments | | | 1,681,715 | | | | (5,228,397 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (2,946,772 | ) | | | 2,127,300 | |
Net decrease in net assets resulting from operations | | | (962,931 | ) | | | (2,581,073 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (17,317 | ) | | | (33,828 | ) |
C-Class | | | (21,349 | ) | | | (4,978 | ) |
H-Class | | | (210,026 | ) | | | (297,344 | ) |
Total distributions to shareholders | | | (248,692 | ) | | | (336,150 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 1,220,926 | | | | 13,139,494 | |
C-Class | | | 3,584,439 | | | | 1,944,282 | |
H-Class | | | 147,081,645 | | | | 295,819,345 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 16,981 | | | | 33,696 | |
C-Class | | | 21,107 | | | | 4,913 | |
H-Class | | | 206,460 | | | | 296,798 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (853,685 | ) | | | (12,570,391 | ) |
C-Class | | | (3,697,102 | ) | | | (2,346,594 | ) |
H-Class | | | (162,669,284 | ) | | | (283,887,233 | ) |
Net increase (decrease) from capital share transactions | | | (15,088,513 | ) | | | 12,434,310 | |
Net increase (decrease) in net assets | | | (16,300,136 | ) | | | 9,517,087 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 19,795,543 | | | | 10,278,456 | |
End of year | | $ | 3,495,407 | | | $ | 19,795,543 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 29,793 | | | | 335,956 | |
C-Class | | | 97,673 | | | | 57,543 | |
H-Class | | | 3,500,708 | | | | 7,753,438 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 399 | | | | 888 | |
C-Class | | | 573 | | | | 148 | |
H-Class | | | 4,858 | | | | 7,837 | |
Shares redeemed | | | | | | | | |
A-Class | | | (20,691 | ) | | | (334,426 | ) |
C-Class | | | (101,540 | ) | | | (69,615 | ) |
H-Class | | | (3,879,104 | ) | | | (7,558,789 | ) |
Net increase (decrease) in shares | | | (367,331 | ) | | | 192,980 | |
116 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 41.24 | | | $ | 35.92 | | | $ | 37.55 | | | $ | 37.31 | | | $ | 38.34 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .56 | | | | .46 | | | | .65 | | | | .34 | | | | .65 | |
Net gain (loss) on investments (realized and unrealized) | | | (10.37 | ) | | | 5.12 | c | | | (2.08 | ) | | | 2.15 | | | | (1.24 | ) |
Total from investment operations | | | (9.81 | ) | | | 5.58 | | | | (1.43 | ) | | | 2.49 | | | | (.59 | ) |
Less distributions from: |
Net investment income | | | (.73 | ) | | | (.26 | ) | | | (.20 | ) | | | (2.25 | ) | | | (.44 | ) |
Total distributions | | | (.73 | ) | | | (.26 | ) | | | (.20 | ) | | | (2.25 | ) | | | (.44 | ) |
Net asset value, end of period | | $ | 30.70 | | | $ | 41.24 | | | $ | 35.92 | | | $ | 37.55 | | | $ | 37.31 | |
|
Total Returnb | | | (24.28 | %) | | | 15.58 | % | | | (3.85 | %) | | | 7.17 | % | | | (1.46 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 781 | | | $ | 658 | | | $ | 486 | | | $ | 1,762 | | | $ | 9,223 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.33 | % | | | 1.18 | % | | | 1.69 | % | | | 0.89 | % | | | 1.82 | % |
Total expenses | | | 1.72 | % | | | 1.72 | % | | | 1.63 | % | | | 1.63 | % | | | 1.62 | % |
Portfolio turnover rate | | | 539 | % | | | 877 | % | | | 1,010 | % | | | 1,060 | % | | | 880 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 35.94 | | | $ | 31.57 | | | $ | 33.28 | | | $ | 33.56 | | | $ | 34.81 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .26 | | | | .31 | | | | .29 | | | | .19 | | | | .22 | |
Net gain (loss) on investments (realized and unrealized) | | | (8.99 | ) | | | 4.32 | c | | | (1.80 | ) | | | 1.78 | | | | (1.03 | ) |
Total from investment operations | | | (8.73 | ) | | | 4.63 | | | | (1.51 | ) | | | 1.97 | | | | (.81 | ) |
Less distributions from: |
Net investment income | | | (.73 | ) | | | (.26 | ) | | | (.20 | ) | | | (2.25 | ) | | | (.44 | ) |
Total distributions | | | (.73 | ) | | | (.26 | ) | | | (.20 | ) | | | (2.25 | ) | | | (.44 | ) |
Net asset value, end of period | | $ | 26.48 | | | $ | 35.94 | | | $ | 31.57 | | | $ | 33.28 | | | $ | 33.56 | |
|
Total Returnb | | | (24.86 | %) | | | 14.72 | % | | | (4.56 | %) | | | 6.37 | % | | | (2.25 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 430 | | | $ | 702 | | | $ | 993 | | | $ | 999 | | | $ | 1,947 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.71 | % | | | 0.94 | % | | | 0.86 | % | | | 0.56 | % | | | 0.69 | % |
Total expenses | | | 2.47 | % | | | 2.46 | % | | | 2.38 | % | | | 2.38 | % | | | 2.36 | % |
Portfolio turnover rate | | | 539 | % | | | 877 | % | | | 1,010 | % | | | 1,060 | % | | | 880 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 117 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 41.14 | | | $ | 35.82 | | | $ | 37.45 | | | $ | 37.21 | | | $ | 38.25 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .55 | | | | .65 | | | | .92 | | | | .27 | | | | .71 | |
Net gain (loss) on investments (realized and unrealized) | | | (10.33 | ) | | | 4.93 | c | | | (2.35 | ) | | | 2.22 | | | | (1.31 | ) |
Total from investment operations | | | (9.78 | ) | | | 5.58 | | | | (1.43 | ) | | | 2.49 | | | | (.60 | ) |
Less distributions from: |
Net investment income | | | (.73 | ) | | | (.26 | ) | | | (.20 | ) | | | (2.25 | ) | | | (.44 | ) |
Total distributions | | | (.73 | ) | | | (.26 | ) | | | (.20 | ) | | | (2.25 | ) | | | (.44 | ) |
Net asset value, end of period | | $ | 30.63 | | | $ | 41.14 | | | $ | 35.82 | | | $ | 37.45 | | | $ | 37.21 | |
|
Total Return | | | (24.27 | %) | | | 15.63 | % | | | (3.86 | %) | | | 7.18 | % | | | (1.49 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,284 | | | $ | 18,436 | | | $ | 8,800 | | | $ | 6,322 | | | $ | 34,504 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.30 | % | | | 1.69 | % | | | 2.43 | % | | | 0.70 | % | | | 1.97 | % |
Total expenses | | | 1.72 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.62 | % |
Portfolio turnover rate | | | 539 | % | | | 877 | % | | | 1,010 | % | | | 1,060 | % | | | 880 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and repurchase of fund shares in relation to fluctuating market value of the investments of the Fund. |
118 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
RETAILING FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in merchandising finished goods and services, including department stores, mail order operations, and other companies involved in selling products to consumers (“Retailing Companies”).
For the one-year period ended March 31, 2020, Retailing Fund Investor Class returned -14.47%, compared with -10.77% for the S&P 500 Consumer Discretionary Index. The broader S&P 500 Index returned -6.98%.
Hypermarkets & super centers contributed the most to return, followed by general merchandise stores. The apparel retail industry, department stores, and specialty stores detracted the most from return.
Amazon.com, Inc., Walmart, Inc., and Pinduduo, Inc. ADR contributed the most to the Fund’s return for the period. Kohl’s Corp., Gap, Inc., and Ulta Beauty, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | May 9, 2001 |
H-Class | April 21, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Amazon.com, Inc. | 14.4% |
Walmart, Inc. | 7.5% |
Alibaba Group Holding Ltd. ADR | 4.4% |
Home Depot, Inc. | 4.3% |
Costco Wholesale Corp. | 3.9% |
Lowe’s Companies, Inc. | 3.2% |
TJX Companies, Inc. | 3.1% |
Booking Holdings, Inc. | 2.8% |
JD.com, Inc. ADR | 2.8% |
Dollar General Corp. | 2.8% |
Top Ten Total | 49.2% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 119 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (14.47%) | 0.39% | 8.48% |
A-Class Shares | (14.66%) | 0.16% | 8.23% |
A-Class Shares with sales charge‡ | (18.72%) | (0.81%) | 7.71% |
C-Class Shares | (15.31%) | (0.60%) | 7.41% |
C-Class Shares with CDSC§ | (16.16%) | (0.60%) | 7.41% |
H-Class Shares** | (14.64%) | 0.15% | 8.12% |
S&P 500 Consumer Discretionary Index | (10.77%) | 7.36% | 13.56% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P Consumer Discretionary Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
120 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
RETAILING FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.5% |
| | | | | | | | | |
Retail - 58.0% |
Walmart, Inc. | | | 2,853 | | | $ | 324,158 | |
Home Depot, Inc. | | | 1,002 | | | | 187,083 | |
Costco Wholesale Corp. | | | 601 | | | | 171,363 | |
Lowe’s Companies, Inc. | | | 1,606 | | | | 138,196 | |
TJX Companies, Inc. | | | 2,858 | | | | 136,641 | |
Dollar General Corp. | | | 808 | | | | 122,016 | |
Target Corp. | | | 1,263 | | | | 117,421 | |
Walgreens Boots Alliance, Inc. | | | 2,491 | | | | 113,963 | |
Ross Stores, Inc. | | | 1,118 | | | | 97,232 | |
O’Reilly Automotive, Inc.* | | | 263 | | | | 79,176 | |
Tiffany & Co. | | | 605 | | | | 78,348 | |
AutoZone, Inc.* | | | 89 | | | | 75,294 | |
Dollar Tree, Inc.* | | | 1,021 | | | | 75,013 | |
Tractor Supply Co. | | | 730 | | | | 61,722 | |
Best Buy Company, Inc. | | | 1,080 | | | | 61,560 | |
Burlington Stores, Inc.* | | | 344 | | | | 54,510 | |
Ulta Beauty, Inc.* | | | 304 | | | | 53,413 | |
Genuine Parts Co. | | | 753 | | | | 50,700 | |
CarMax, Inc.* | | | 823 | | | | 44,302 | |
Carvana Co.*,1 | | | 770 | | | | 42,419 | |
BJ’s Wholesale Club Holdings, Inc.* | | | 1,584 | | | | 40,345 | |
Advance Auto Parts, Inc. | | | 427 | | | | 39,848 | |
Five Below, Inc.* | | | 424 | | | | 29,841 | |
Floor & Decor Holdings, Inc. — Class A* | | | 902 | | | | 28,945 | |
L Brands, Inc. | | | 2,480 | | | | 28,669 | |
Ollie’s Bargain Outlet Holdings, Inc.* | | | 610 | | | | 28,267 | |
Williams-Sonoma, Inc. | | | 656 | | | | 27,893 | |
Foot Locker, Inc. | | | 1,036 | | | | 22,844 | |
Gap, Inc. | | | 2,917 | | | | 20,536 | |
National Vision Holdings, Inc.* | | | 984 | | | | 19,109 | |
Nordstrom, Inc. | | | 1,242 | | | | 19,052 | |
RH* | | | 186 | | | | 18,687 | |
Dick’s Sporting Goods, Inc. | | | 871 | | | | 18,517 | |
Urban Outfitters, Inc.* | | | 1,208 | | | | 17,202 | |
American Eagle Outfitters, Inc. | | | 2,142 | | | | 17,029 | |
Kohl’s Corp. | | | 1,128 | | | | 16,458 | |
Macy’s, Inc. | | | 2,836 | | | | 13,925 | |
Abercrombie & Fitch Co. — Class A | | | 1,227 | | | | 11,153 | |
Bed Bath & Beyond, Inc. | | | 1,756 | | | | 7,393 | |
Signet Jewelers Ltd. | | | 1,016 | | | | 6,553 | |
Children’s Place, Inc. | | | 310 | | | | 6,064 | |
Total Retail | | | | | | | 2,522,860 | |
Internet - 38.6% |
Amazon.com, Inc.* | | | 321 | | | | 625,860 | |
Alibaba Group Holding Ltd. ADR* | | | 994 | | | | 193,313 | |
Booking Holdings, Inc.* | | | 92 | | | | 123,769 | |
JD.com, Inc. ADR* | | | 3,043 | | | | 123,242 | |
eBay, Inc. | | | 3,015 | | | | 90,631 | |
Chewy, Inc. — Class A* | | | 2,357 | | | | 88,364 | |
Pinduoduo, Inc. ADR* | | | 1,921 | | | | 69,214 | |
MercadoLibre, Inc.* | | | 134 | | | | 65,470 | |
Trip.com Group Ltd. ADR* | | | 2,184 | | | | 51,215 | |
Baozun, Inc. ADR*,1 | | | 1,499 | | | | 41,882 | |
Expedia Group, Inc. | | | 740 | | | | 41,640 | |
Etsy, Inc.* | | | 1,029 | | | | 39,555 | |
Stamps.com, Inc.* | | | 280 | | | | 36,422 | |
Wayfair, Inc. — Class A*,1 | | | 666 | | | | 35,591 | |
GrubHub, Inc.* | | | 858 | | | | 34,946 | |
Stitch Fix, Inc. — Class A*,1 | | | 1,226 | | | | 15,570 | |
Total Internet | | | | | | | 1,676,684 | |
| | | | | | | | | |
Distribution & Wholesale - 2.1% |
Pool Corp. | | | 276 | | | | 54,309 | |
LKQ Corp.* | | | 1,883 | | | | 38,620 | |
Total Distribution & Wholesale | | | | | | | 92,929 | |
| | | | | | | | | |
Commercial Services - 0.8% |
Monro, Inc. | | | 413 | | | | 18,093 | |
Aaron’s, Inc. | | | 681 | | | | 15,513 | |
Total Commercial Services | | | | | | | 33,606 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $4,460,248) | | | | | | | 4,326,079 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.0% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 461 | | | | 461 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 178 | | | | 178 | |
Total Repurchase Agreements | | | | |
(Cost $639) | | | | | | | 639 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
RETAILING FUND | |
| | | Shares | | | Value | |
| SECURITIES LENDING COLLATERAL†,3 - 2.3% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 98,999 | | | $ | 98,999 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $98,999) | | | | | | | 98,999 | |
| | | | | | | | | |
| Total Investments - 101.8% | | | | | | | | |
| (Cost $4,559,886) | | | | | | $ | 4,425,717 | |
| Other Assets & Liabilities, net - (1.8)% | | | | | | | (78,547 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 4,347,170 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 4,326,079 | | | $ | — | | | $ | — | | | $ | 4,326,079 | |
Repurchase Agreements | | | — | | | | 639 | | | | — | | | | 639 | |
Securities Lending Collateral | | | 98,999 | | | | — | | | | — | | | | 98,999 | |
Total Assets | | $ | 4,425,078 | | | $ | 639 | | | $ | — | | | $ | 4,425,717 | |
122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $100,476 of securities loaned (cost $4,559,247) | | $ | 4,425,078 | |
Repurchase agreements, at value (cost $639) | | | 639 | |
Cash | | | 512 | |
Receivables: |
Securities sold | | | 32,393 | |
Dividends | | | 8,152 | |
Fund shares sold | | | 193 | |
Securities lending income | | | 155 | |
Total assets | | | 4,467,122 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 98,999 | |
Management fees | | | 5,356 | |
Transfer agent and administrative fees | | | 2,120 | |
Portfolio accounting fees | | | 630 | |
Distribution and service fees | | | 437 | |
Trustees’ fees* | | | 190 | |
Miscellaneous | | | 12,220 | |
Total liabilities | | | 119,952 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 4,347,170 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 6,519,531 | |
Total distributable earnings (loss) | | | (2,172,361 | ) |
Net assets | | $ | 4,347,170 | |
| | | | | |
Investor Class: |
Net assets | | $ | 3,315,767 | |
Capital shares outstanding | | | 115,835 | |
Net asset value per share | | $ | 28.62 | |
| | | | | |
A-Class: |
Net assets | | $ | 455,995 | |
Capital shares outstanding | | | 16,887 | |
Net asset value per share | | $ | 27.00 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 28.35 | |
| | | | | |
C-Class: |
Net assets | | $ | 230,282 | |
Capital shares outstanding | | | 9,730 | |
Net asset value per share | | $ | 23.67 | |
| | | | | |
H-Class: |
Net assets | | $ | 345,126 | |
Capital shares outstanding | | | 13,098 | |
Net asset value per share | | $ | 26.35 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $547) | | $ | 170,309 | |
Interest | | | 1,802 | |
Income from securities lending, net | | | 13,180 | |
Total investment income | | | 185,291 | |
| | | | | |
Expenses: |
Management fees | | | 122,908 | |
Distribution and service fees: |
A-Class | | | 4,066 | |
C-Class | | | 3,882 | |
H-Class | | | 3,148 | |
Transfer agent and administrative fees | | | 36,694 | |
Registration fees | | | 16,180 | |
Portfolio accounting fees | | | 14,460 | |
Professional fees | | | 9,364 | |
Trustees’ fees* | | | 4,559 | |
Custodian fees | | | 2,118 | |
Line of credit fees | | | 92 | |
Miscellaneous | | | 6,642 | |
Total expenses | | | 224,113 | |
Net investment loss | | | (38,822 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 4,774,021 | |
Net realized gain | | | 4,774,021 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (6,572,492 | ) |
Net change in unrealized appreciation (depreciation) | | | (6,572,492 | ) |
Net realized and unrealized loss | | | (1,798,471 | ) |
Net decrease in net assets resulting from operations | | $ | (1,837,293 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 123 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (38,822 | ) | | $ | (83,642 | ) |
Net realized gain on investments | | | 4,774,021 | | | | 488,545 | |
Net change in unrealized appreciation (depreciation) on investments | | | (6,572,492 | ) | | | 2,257,492 | |
Net increase (decrease) in net assets resulting from operations | | | (1,837,293 | ) | | | 2,662,395 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | — | | | | (62,096 | ) |
A-Class | | | — | | | | (2,423 | ) |
C-Class | | | — | | | | (1,147 | ) |
H-Class | | | — | | | | (6,646 | ) |
Total distributions to shareholders | | | — | | | | (72,312 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 31,349,501 | | | | 109,264,472 | |
A-Class | | | 3,834,435 | | | | 10,313,921 | |
C-Class | | | 834,190 | | | | 2,192,820 | |
H-Class | | | 3,326,658 | | | | 71,311,377 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | — | | | | 61,699 | |
A-Class | | | — | | | | 2,355 | |
C-Class | | | — | | | | 1,137 | |
H-Class | | | — | | | | 6,629 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (48,988,755 | ) | | | (108,396,873 | ) |
A-Class | | | (9,222,466 | ) | | | (6,184,722 | ) |
C-Class | | | (1,028,876 | ) | | | (2,382,440 | ) |
H-Class | | | (9,207,289 | ) | | | (70,311,011 | ) |
Net increase (decrease) from capital share transactions | | | (29,102,602 | ) | | | 5,879,364 | |
Net increase (decrease) in net assets | | | (30,939,895 | ) | | | 8,469,447 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 35,287,065 | | | | 26,817,618 | |
End of year | | $ | 4,347,170 | | | $ | 35,287,065 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 925,612 | | | | 3,410,858 | |
A-Class | | | 124,928 | | | | 333,772 | |
C-Class | | | 29,194 | | | | 82,019 | |
H-Class | | | 105,560 | | | | 2,409,627 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | — | | | | 2,028 | |
A-Class | | | — | | | | 82 | |
C-Class | | | — | | | | 45 | |
H-Class | | | — | | | | 236 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (1,489,548 | ) | | | (3,391,851 | ) |
A-Class | | | (291,563 | ) | | | (194,378 | ) |
C-Class | | | (36,199 | ) | | | (89,015 | ) |
H-Class | | | (295,381 | ) | | | (2,388,929 | ) |
Net increase (decrease) in shares | | | (927,397 | ) | | | 174,494 | |
124 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 33.46 | | | $ | 30.17 | | | $ | 26.78 | | | $ | 26.98 | | | $ | 28.13 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.06 | ) | | | (.02 | ) | | | .11 | | | | .03 | | | | (.03 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (4.78 | ) | | | 3.35 | | | | 3.28 | | | | (.23 | ) | | | (1.10 | ) |
Total from investment operations | | | (4.84 | ) | | | 3.33 | | | | 3.39 | | | | (.20 | ) | | | (1.13 | ) |
Less distributions from: |
Net investment income | | | — | | | | (.03 | ) | | | — | | | | — | | | | (.02 | ) |
Net realized gains | | | — | | | | (.01 | ) | | | — | | | | — | | | | — | |
Total distributions | | | — | | | | (.04 | ) | | | — | | | | — | | | | (.02 | ) |
Net asset value, end of period | | $ | 28.62 | | | $ | 33.46 | | | $ | 30.17 | | | $ | 26.78 | | | $ | 26.98 | |
|
Total Return | | | (14.47 | %) | | | 11.06 | % | | | 12.66 | % | | | (0.74 | %) | | | (4.01 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,316 | | | $ | 22,748 | | | $ | 19,876 | | | $ | 8,498 | | | $ | 10,265 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.17 | %) | | | (0.07 | %) | | | 0.40 | % | | | 0.10 | % | | | (0.10 | %) |
Total expenses | | | 1.47 | % | | | 1.45 | % | | | 1.37 | % | | | 1.37 | % | | | 1.34 | % |
Portfolio turnover rate | | | 228 | % | | | 314 | % | | | 1,306 | % | | | 887 | % | | | 238 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 31.64 | | | $ | 28.60 | | | $ | 25.44 | | | $ | 25.69 | | | $ | 26.85 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.13 | ) | | | (.05 | ) | | | — | b | | | (.08 | ) | | | (.09 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (4.51 | ) | | | 3.13 | | | | 3.16 | | | | (.17 | ) | | | (1.05 | ) |
Total from investment operations | | | (4.64 | ) | | | 3.08 | | | | 3.16 | | | | (.25 | ) | | | (1.14 | ) |
Less distributions from: |
Net investment income | | | — | | | | (.03 | ) | | | — | | | | — | | | | (.02 | ) |
Net realized gains | | | — | | | | (.01 | ) | | | — | | | | — | | | | — | |
Total distributions | | | — | | | | (.04 | ) | | | — | | | | — | | | | (.02 | ) |
Net asset value, end of period | | $ | 27.00 | | | $ | 31.64 | | | $ | 28.60 | | | $ | 25.44 | | | $ | 25.69 | |
|
Total Returnc | | | (14.66 | %) | | | 10.80 | % | | | 12.42 | % | | | (0.97 | %) | | | (4.24 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 456 | | | $ | 5,806 | | | $ | 1,260 | | | $ | 1,217 | | | $ | 6,313 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.42 | %) | | | (0.16 | %) | | | — | e | | | (0.34 | %) | | | (0.36 | %) |
Total expenses | | | 1.72 | % | | | 1.72 | % | | | 1.63 | % | | | 1.62 | % | | | 1.60 | % |
Portfolio turnover rate | | | 228 | % | | | 314 | % | | | 1,306 | % | | | 887 | % | | | 238 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 27.95 | | | $ | 25.46 | | | $ | 22.83 | | | $ | 23.23 | | | $ | 24.46 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.33 | ) | | | (.31 | ) | | | (.17 | ) | | | (.23 | ) | | | (.24 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (3.95 | ) | | | 2.84 | | | | 2.80 | | | | (.17 | ) | | | (.97 | ) |
Total from investment operations | | | (4.28 | ) | | | 2.53 | | | | 2.63 | | | | (.40 | ) | | | (1.21 | ) |
Less distributions from: |
Net investment income | | | — | | | | (.03 | ) | | | — | | | | — | | | | (.02 | ) |
Net realized gains | | | — | | | | (.01 | ) | | | — | | | | — | | | | — | |
Total distributions | | | — | | | | (.04 | ) | | | — | | | | — | | | | (.02 | ) |
Net asset value, end of period | | $ | 23.67 | | | $ | 27.95 | | | $ | 25.46 | | | $ | 22.83 | | | $ | 23.23 | |
|
Total Returnc | | | (15.31 | %) | | | 9.97 | % | | | 11.52 | % | | | (1.76 | %) | | | (4.94 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 230 | | | $ | 468 | | | $ | 603 | | | $ | 1,601 | | | $ | 2,532 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.16 | %) | | | (1.15 | %) | | | (0.71 | %) | | | (1.00 | %) | | | (1.04 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 228 | % | | | 314 | % | | | 1,306 | % | | | 887 | % | | | 238 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016d | |
Per Share Data |
Net asset value, beginning of period | | $ | 30.87 | | | $ | 27.91 | | | $ | 24.83 | | | $ | 25.07 | | | $ | 26.22 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.20 | ) | | | (.11 | ) | | | .05 | | | | (— | )b | | | (.11 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (4.32 | ) | | | 3.11 | | | | 3.03 | | | | (.24 | ) | | | (1.02 | ) |
Total from investment operations | | | (4.52 | ) | | | 3.00 | | | | 3.08 | | | | (.24 | ) | | | (1.13 | ) |
Less distributions from: |
Net investment income | | | — | | | | (.03 | ) | | | — | | | | — | | | | (.02 | ) |
Net realized gains | | | — | | | | (.01 | ) | | | — | | | | — | | | | — | |
Total distributions | | | — | | | | (.04 | ) | | | — | | | | — | | | | (.02 | ) |
Net asset value, end of period | | $ | 26.35 | | | $ | 30.87 | | | $ | 27.91 | | | $ | 24.83 | | | $ | 25.07 | |
|
Total Return | | | (14.64 | %) | | | 10.81 | % | | | 12.40 | % | | | (0.96 | %) | | | (4.31 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 345 | | | $ | 6,265 | | | $ | 5,079 | | | $ | 411 | | | $ | 3,407 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.64 | %) | | | (0.37 | %) | | | 0.18 | % | | | (— | )e | | | (0.44 | %) |
Total expenses | | | 1.72 | % | | | 1.70 | % | | | 1.62 | % | | | 1.62 | % | | | 1.71 | % |
Portfolio turnover rate | | | 228 | % | | | 314 | % | | | 1,306 | % | | | 887 | % | | | 238 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Net investment income is less than $0.01 per share. |
c | Total return does not reflect the impact of any applicable sales charges. |
d | Effective September 30, 2015, the Fund’s Advisor Class were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
e | Less than 0.01% or (0.01%). |
126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
TECHNOLOGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the technology sector, including computer software and service companies, semiconductor manufacturers, networking and telecommunications equipment manufacturers, PC hardware, and peripherals companies (“Technology Companies”).
For the one-year period ended March 31, 2020, Technology Fund Investor Class returned -1.06%, compared with 10.43% for the S&P 500 Information Technology Index. The broader S&P 500 Index returned -6.98%.
Semiconductors contributed the most to the Fund’s return, followed by systems software and semiconductor equipment. Interactive media & services, IT consulting, and communications equipment detracted the most from return.
Microsoft Corp., Apple, Inc., and Zoom Video Communications, Inc. – Class A contributed the most to the Fund’s return for the period. DXC Technology Co., Cisco Systems, Inc., and VMware, Inc. – Class A detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 14, 1998 |
A-Class | September 1, 2004 |
C-Class | April 18, 2001 |
H-Class | April 29, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Microsoft Corp. | 5.3% |
Apple, Inc. | 4.9% |
Alphabet, Inc. — Class A | 4.0% |
Facebook, Inc. — Class A | 3.0% |
Visa, Inc. — Class A | 2.5% |
Intel Corp. | 2.2% |
Mastercard, Inc. — Class A | 2.1% |
NVIDIA Corp. | 2.0% |
Adobe, Inc. | 1.9% |
Oracle Corp. | 1.8% |
Top Ten Total | 29.7% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 127 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (1.06%) | 11.86% | 11.51% |
A-Class Shares | (1.31%) | 11.59% | 11.22% |
A-Class Shares with sales charge‡ | (6.00%) | 10.50% | 10.68% |
C-Class Shares | (2.05%) | 10.76% | 10.40% |
C-Class Shares with CDSC§ | (3.02%) | 10.76% | 10.40% |
H-Class Shares** | (1.30%) | 11.57% | 11.08% |
S&P 500 Information Technology Index | 10.43% | 17.05% | 15.79% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
128 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
TECHNOLOGY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.6% |
| | | | | | | | | |
Software - 32.2% |
Microsoft Corp. | | | 11,984 | | | $ | 1,889,997 | |
Adobe, Inc.* | | | 2,079 | | | | 661,621 | |
Oracle Corp. | | | 13,366 | | | | 645,979 | |
salesforce.com, Inc.* | | | 3,984 | | | | 573,616 | |
Zoom Video Communications, Inc. — Class A* | | | 3,448 | | | | 503,822 | |
Fidelity National Information Services, Inc. | | | 3,623 | | | | 440,702 | |
ServiceNow, Inc.* | | | 1,411 | | | | 404,364 | |
Fiserv, Inc.* | | | 4,141 | | | | 393,354 | |
Intuit, Inc. | | | 1,706 | | | | 392,380 | |
Activision Blizzard, Inc. | | | 6,191 | | | | 368,241 | |
VMware, Inc. — Class A* | | | 2,859 | | | | 346,225 | |
Autodesk, Inc.* | | | 1,880 | | | | 293,468 | |
Electronic Arts, Inc.* | | | 2,834 | | | | 283,882 | |
Atlassian Corporation plc — Class A* | | | 1,996 | | | | 273,971 | |
Workday, Inc. — Class A* | | | 2,050 | | | | 266,951 | |
Citrix Systems, Inc. | | | 1,851 | | | | 262,009 | |
NetEase, Inc. ADR | | | 813 | | | | 260,940 | |
DocuSign, Inc.* | | | 2,693 | | | | 248,833 | |
Synopsys, Inc.* | | | 1,776 | | | | 228,731 | |
ANSYS, Inc.* | | | 983 | | | | 228,518 | |
Cadence Design Systems, Inc.* | | | 3,457 | | | | 228,300 | |
Paychex, Inc. | | | 3,527 | | | | 221,919 | |
Splunk, Inc.* | | | 1,739 | | | | 219,514 | |
Akamai Technologies, Inc.* | | | 2,382 | | | | 217,929 | |
Take-Two Interactive Software, Inc.* | | | 1,664 | | | | 197,367 | |
Jack Henry & Associates, Inc. | | | 1,245 | | | | 193,274 | |
Twilio, Inc. — Class A* | | | 2,000 | | | | 178,980 | |
Paycom Software, Inc.* | | | 809 | | | | 163,426 | |
Coupa Software, Inc.* | | | 1,125 | | | | 157,196 | |
MongoDB, Inc.* | | | 1,125 | | | | 153,607 | |
SS&C Technologies Holdings, Inc. | | | 3,502 | | | | 153,458 | |
Dropbox, Inc. — Class A* | | | 8,005 | | | | 144,890 | |
Alteryx, Inc. — Class A* | | | 1,386 | | | | 131,906 | |
PTC, Inc.* | | | 2,137 | | | | 130,806 | |
Nutanix, Inc. — Class A* | | | 4,249 | | | | 67,134 | |
Total Software | | | | | | | 11,527,310 | |
| | | | | | | | | |
Semiconductors - 19.6% |
Intel Corp. | | | 14,794 | | | | 800,651 | |
NVIDIA Corp. | | | 2,739 | | | | 722,000 | |
Texas Instruments, Inc. | | | 4,677 | | | | 467,373 | |
Broadcom, Inc. | | | 1,913 | | | | 453,572 | |
QUALCOMM, Inc. | | | 6,158 | | | | 416,589 | |
Advanced Micro Devices, Inc.* | | | 8,714 | | | | 396,313 | |
Micron Technology, Inc.* | | | 7,644 | | | | 321,507 | |
Applied Materials, Inc. | | | 6,664 | | | | 305,345 | |
Lam Research Corp. | | | 1,199 | | | | 287,760 | |
Analog Devices, Inc. | | | 3,009 | | | | 269,757 | |
KLA Corp. | | | 1,631 | | | | 234,440 | |
Taiwan Semiconductor Manufacturing Company Ltd. ADR | | | 4,627 | | | | 221,124 | |
Xilinx, Inc. | | | 2,789 | | | | 217,375 | |
NXP Semiconductor N.V. | | | 2,610 | | | | 216,447 | |
ASML Holding N.V. — Class G | | | 780 | | | | 204,079 | |
Marvell Technology Group Ltd. | | | 8,648 | | | | 195,704 | |
Skyworks Solutions, Inc. | | | 2,050 | | | | 183,229 | |
Microchip Technology, Inc. | | | 2,623 | | | | 177,839 | |
Maxim Integrated Products, Inc. | | | 3,590 | | | | 174,510 | |
Cypress Semiconductor Corp. | | | 6,830 | | | | 159,276 | |
Teradyne, Inc. | | | 2,685 | | | | 145,446 | |
Qorvo, Inc.* | | | 1,697 | | | | 136,829 | |
IPG Photonics Corp.* | | | 1,042 | | | | 114,912 | |
Cree, Inc.* | | | 2,565 | | | | 90,955 | |
ON Semiconductor Corp.* | | | 7,121 | | | | 88,585 | |
Total Semiconductors | | | | | | | 7,001,617 | |
| | | | | | | | | |
Internet - 16.1% |
Alphabet, Inc. — Class A* | | | 1,224 | | | | 1,422,227 | |
Facebook, Inc. — Class A* | | | 6,341 | | | | 1,057,679 | |
Shopify, Inc. — Class A* | | | 705 | | | | 293,936 | |
Baidu, Inc. ADR* | | | 2,452 | | | | 247,137 | |
VeriSign, Inc.* | | | 1,353 | | | | 243,662 | |
Okta, Inc.* | | | 1,755 | | | | 214,566 | |
Match Group, Inc.*,1 | | | 3,141 | | | | 207,432 | |
Twitter, Inc.* | | | 8,420 | | | | 206,795 | |
Snap, Inc. — Class A* | | | 16,176 | | | | 192,333 | |
Palo Alto Networks, Inc.* | | | 1,125 | | | | 184,455 | |
IAC/InterActiveCorp* | | | 988 | | | | 177,079 | |
CDW Corp. | | | 1,718 | | | | 160,238 | |
NortonLifeLock, Inc. | | | 8,407 | | | | 157,295 | |
Weibo Corp. ADR* | | | 4,573 | | | | 151,412 | |
Pinterest, Inc. — Class A* | | | 9,163 | | | | 141,477 | |
Zendesk, Inc.* | | | 2,087 | | | | 133,589 | |
Zillow Group, Inc. — Class C*,1 | | | 3,660 | | | | 131,833 | |
Momo, Inc. ADR | | | 5,905 | | | | 128,079 | |
Proofpoint, Inc.* | | | 1,179 | | | | 120,954 | |
F5 Networks, Inc.* | | | 1,104 | | | | 117,719 | |
TripAdvisor, Inc. | | | 3,660 | | | | 63,647 | |
Total Internet | | | | | | | 5,753,544 | |
| | | | | | | | | |
Computers - 13.7% |
Apple, Inc. | | | 6,847 | | | | 1,741,124 | |
International Business Machines Corp. | | | 4,407 | | | | 488,868 | |
Accenture plc — Class A | | | 1,992 | | | | 325,214 | |
Dell Technologies, Inc. — Class C* | | | 6,586 | | | | 260,476 | |
HP, Inc. | | | 14,561 | | | | 252,779 | |
Cognizant Technology Solutions Corp. — Class A | | | 5,067 | | | | 235,463 | |
Fortinet, Inc.* | | | 2,133 | | | | 215,796 | |
Check Point Software Technologies Ltd.* | | | 1,967 | | | | 197,762 | |
Crowdstrike Holdings, Inc. — Class A* | | | 3,527 | | | | 196,383 | |
Seagate Technology plc | | | 3,656 | | | | 178,413 | |
Zscaler, Inc.* | | | 2,789 | | | | 169,739 | |
Western Digital Corp. | | | 3,818 | | | | 158,905 | |
Hewlett Packard Enterprise Co. | | | 15,669 | | | | 152,146 | |
NetApp, Inc. | | | 3,262 | | | | 135,993 | |
Lumentum Holdings, Inc.* | | | 1,681 | | | | 123,890 | |
DXC Technology Co. | | | 4,469 | | | | 58,320 | |
Total Computers | | | | | | | 4,891,271 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 129 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
TECHNOLOGY FUND | |
| | Shares | | | Value | |
Diversified Financial Services - 5.0% |
Visa, Inc. — Class A | | | 5,561 | | | $ | 895,988 | |
Mastercard, Inc. — Class A | | | 3,150 | | | | 760,914 | |
Western Union Co. | | | 6,718 | | | | 121,798 | |
Total Diversified Financial Services | | | | | | | 1,778,700 | |
| | | | | | | | | |
Commercial Services - 4.8% |
PayPal Holdings, Inc.* | | | 5,619 | | | | 537,963 | |
Automatic Data Processing, Inc. | | | 2,743 | | | | 374,913 | |
Global Payments, Inc. | | | 2,187 | | | | 315,431 | |
Square, Inc. — Class A* | | | 4,457 | | | | 233,458 | |
FleetCor Technologies, Inc.* | | | 954 | | | | 177,959 | |
Euronet Worldwide, Inc.* | | | 996 | | | | 85,377 | |
Total Commercial Services | | | | | | | 1,725,101 | |
| | | | | | | | | |
Telecommunications - 3.8% |
Cisco Systems, Inc. | | | 15,976 | | | | 628,017 | |
Motorola Solutions, Inc. | | | 1,764 | | | | 234,471 | |
Arista Networks, Inc.* | | | 1,042 | | | | 211,057 | |
Corning, Inc. | | | 8,773 | | | | 180,197 | |
Juniper Networks, Inc. | | | 6,337 | | | | 121,290 | |
Total Telecommunications | | | | | | | 1,375,032 | |
| | | | | | | | | |
Electronics - 2.2% |
Amphenol Corp. — Class A | | | 2,851 | | | | 207,781 | |
Keysight Technologies, Inc.* | | | 2,316 | | | | 193,803 | |
TE Connectivity Ltd. | | | 2,274 | | | | 143,216 | |
Trimble, Inc.* | | | 4,187 | | | | 133,272 | |
FLIR Systems, Inc. | | | 2,747 | | | | 87,602 | |
Total Electronics | | | | | | | 765,674 | |
| | | | | | | | | |
Energy-Alternate Sources - 1.1% |
SolarEdge Technologies, Inc.* | | | 2,204 | | | | 180,464 | |
Enphase Energy, Inc.* | | | 3,718 | | | | 120,054 | |
First Solar, Inc.* | | | 2,324 | | | | 83,803 | |
Total Energy-Alternate Sources | | | | | | | 384,321 | |
| | | | | | | | | |
Office & Business Equipment - 0.4% |
Zebra Technologies Corp. — Class A* | | | 797 | | | | 146,329 | |
Advertising - 0.4% |
Trade Desk, Inc. — Class A* | | | 701 | | | | 135,293 | |
| | | | | | | | | |
Electrical Components & Equipment - 0.3% |
Universal Display Corp. | | | 830 | | | | 109,378 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $22,846,110) | | | | | | | 35,593,570 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 90,517 | | | | 90,517 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 34,814 | | | | 34,814 | |
Total Repurchase Agreements | | | | |
(Cost $125,331) | | | | | | | 125,331 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 0.7% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 265,039 | | | | 265,039 | |
Total Securities Lending Collateral | | | | |
(Cost $265,039) | | | | | | | 265,039 | |
| | | | | | | | | |
Total Investments - 100.7% | | | | |
(Cost $23,236,480) | | $ | 35,983,940 | |
Other Assets & Liabilities, net - (0.7)% | | | (240,938 | ) |
Total Net Assets - 100.0% | | $ | 35,743,002 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
130 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
TECHNOLOGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 35,593,570 | | | $ | — | | | $ | — | | | $ | 35,593,570 | |
Repurchase Agreements | | | — | | | | 125,331 | | | | — | | | | 125,331 | |
Securities Lending Collateral | | | 265,039 | | | | — | | | | — | | | | 265,039 | |
Total Assets | | $ | 35,858,609 | | | $ | 125,331 | | | $ | — | | | $ | 35,983,940 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 131 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $254,399 of securities loaned (cost $23,111,149) | | $ | 35,858,609 | |
Repurchase agreements, at value (cost $125,331) | | | 125,331 | |
Cash | | | 100,479 | |
Receivables: |
Fund shares sold | | | 144,742 | |
Dividends | | | 21,624 | |
Foreign tax reclaims | | | 1,107 | |
Securities lending income | | | 643 | |
Total assets | | | 36,252,535 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 265,039 | |
Fund shares redeemed | | | 119,701 | |
Management fees | | | 32,235 | |
Transfer agent and administrative fees | | | 12,635 | |
Distribution and service fees | | | 5,328 | |
Portfolio accounting fees | | | 3,792 | |
Trustees’ fees* | | | 1,082 | |
Miscellaneous | | | 69,721 | |
Total liabilities | | | 509,533 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 35,743,002 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 26,099,955 | |
Total distributable earnings (loss) | | | 9,643,047 | |
Net assets | | $ | 35,743,002 | |
| | | | | |
Investor Class: |
Net assets | | $ | 23,190,409 | |
Capital shares outstanding | | | 231,415 | |
Net asset value per share | | $ | 100.21 | |
| | | | | |
A-Class: |
Net assets | | $ | 5,321,290 | |
Capital shares outstanding | | | 57,345 | |
Net asset value per share | | $ | 92.79 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 97.42 | |
| | | | | |
C-Class: |
Net assets | | $ | 3,795,973 | |
Capital shares outstanding | | | 46,162 | |
Net asset value per share | | $ | 82.23 | |
| | | | | |
H-Class: |
Net assets | | $ | 3,435,330 | |
Capital shares outstanding | | | 37,869 | |
Net asset value per share | | $ | 90.72 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1,816) | | $ | 969,260 | |
Interest | | | 8,798 | |
Income from securities lending, net | | | 4,811 | |
Total investment income | | | 982,869 | |
| | | | | |
Expenses: |
Management fees | | | 652,616 | |
Distribution and service fees: |
A-Class | | | 16,849 | |
C-Class | | | 51,652 | |
H-Class | | | 20,338 | |
Transfer agent and administrative fees | | | 195,100 | |
Portfolio accounting fees | | | 76,778 | |
Registration fees | | | 63,345 | |
Professional fees | | | 27,843 | |
Trustees’ fees* | | | 16,776 | |
Custodian fees | | | 11,131 | |
Line of credit fees | | | 126 | |
Miscellaneous | | | 88,409 | |
Total expenses | | | 1,220,963 | |
Net investment loss | | | (238,094 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 7,471,785 | |
Net realized gain | | | 7,471,785 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (9,218,136 | ) |
Net change in unrealized appreciation (depreciation) | | | (9,218,136 | ) |
Net realized and unrealized loss | | | (1,746,351 | ) |
Net decrease in net assets resulting from operations | | $ | (1,984,445 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
132 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (238,094 | ) | | $ | (522,994 | ) |
Net realized gain on investments | | | 7,471,785 | | | | 3,767,489 | |
Net change in unrealized appreciation (depreciation) on investments | | | (9,218,136 | ) | | | (1,364,919 | ) |
Net increase (decrease) in net assets resulting from operations | | | (1,984,445 | ) | | | 1,879,576 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (218,299 | ) | | | (3,080,009 | ) |
A-Class | | | (36,076 | ) | | | (302,692 | ) |
C-Class | | | (29,921 | ) | | | (250,584 | ) |
H-Class | | | (44,819 | ) | | | (892,083 | ) |
Total distributions to shareholders | | | (329,115 | ) | | | (4,525,368 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 114,605,193 | | | | 237,217,659 | |
A-Class | | | 2,836,127 | | | | 5,302,160 | |
C-Class | | | 3,924,183 | | | | 4,603,973 | |
H-Class | | | 30,618,988 | | | | 93,765,945 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 214,441 | | | | 2,784,344 | |
A-Class | | | 35,404 | | | | 296,049 | |
C-Class | | | 29,756 | | | | 248,701 | |
H-Class | | | 44,810 | | | | 861,141 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (150,527,001 | ) | | | (253,756,561 | ) |
A-Class | | | (3,403,826 | ) | | | (4,878,516 | ) |
C-Class | | | (5,615,143 | ) | | | (6,113,433 | ) |
H-Class | | | (40,117,567 | ) | | | (120,685,679 | ) |
Net decrease from capital share transactions | | | (47,354,635 | ) | | | (40,354,217 | ) |
Net decrease in net assets | | | (49,668,195 | ) | | | (43,000,009 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 85,411,197 | | | | 128,411,206 | |
End of year | | $ | 35,743,002 | | | $ | 85,411,197 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 1,049,477 | | | | 2,394,637 | |
A-Class | | | 28,267 | | | | 57,645 | |
C-Class | | | 43,711 | | | | 56,674 | |
H-Class | | | 314,033 | | | | 1,031,403 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 1,897 | | | | 31,341 | |
A-Class | | | 338 | | | | 3,586 | |
C-Class | | | 320 | | | | 3,364 | |
H-Class | | | 438 | | | | 10,668 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (1,419,055 | ) | | | (2,638,782 | ) |
A-Class | | | (34,820 | ) | | | (54,600 | ) |
C-Class | | | (64,028 | ) | | | (73,935 | ) |
H-Class | | | (415,628 | ) | | | (1,366,969 | ) |
Net decrease in shares | | | (495,050 | ) | | | (544,968 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 133 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 101.77 | | | $ | 94.62 | | | $ | 75.45 | | | $ | 60.53 | | | $ | 61.23 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.22 | ) | | | (.31 | ) | | | (.29 | ) | | | (.09 | ) | | | (.06 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (.80 | ) | | | 11.99 | | | | 20.66 | | | | 15.01 | | | | (.64 | ) |
Total from investment operations | | | (1.02 | ) | | | 11.68 | | | | 20.37 | | | | 14.92 | | | | (.70 | ) |
Less distributions from: |
Net realized gains | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Total distributions | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 100.21 | | | $ | 101.77 | | | $ | 94.62 | | | $ | 75.45 | | | $ | 60.53 | |
|
Total Return | | | (1.06 | %) | | | 13.05 | % | | | 27.11 | % | | | 24.63 | % | | | (1.14 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 23,190 | | | $ | 60,972 | | | $ | 76,820 | | | $ | 55,016 | | | $ | 22,167 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.20 | %) | | | (0.32 | %) | | | (0.34 | %) | | | (0.13 | %) | | | (0.10 | %) |
Total expenses | | | 1.47 | % | | | 1.46 | % | | | 1.37 | % | | | 1.38 | % | | | 1.35 | % |
Portfolio turnover rate | | | 165 | % | | | 255 | % | | | 270 | % | | | 320 | % | | | 388 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 94.51 | | | $ | 88.40 | | | $ | 70.74 | | | $ | 56.88 | | | $ | 57.69 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.41 | ) | | | (.49 | ) | | | (.45 | ) | | | (.25 | ) | | | (.14 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (.77 | ) | | | 11.13 | | | | 19.31 | | | | 14.11 | | | | (.67 | ) |
Total from investment operations | | | (1.18 | ) | | | 10.64 | | | | 18.86 | | | | 13.86 | | | | (.81 | ) |
Less distributions from: |
Net realized gains | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Total distributions | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 92.79 | | | $ | 94.51 | | | $ | 88.40 | | | $ | 70.74 | | | $ | 56.88 | |
|
Total Returnb | | | (1.31 | %) | | | 12.77 | % | | | 26.77 | % | | | 24.37 | % | | | (1.40 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 5,321 | | | $ | 6,007 | | | $ | 5,033 | | | $ | 3,294 | | | $ | 8,327 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.40 | %) | | | (0.54 | %) | | | (0.56 | %) | | | (0.40 | %) | | | (0.25 | %) |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.63 | % | | | 1.60 | % |
Portfolio turnover rate | | | 165 | % | | | 255 | % | | | 270 | % | | | 320 | % | | | 388 | % |
134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 84.44 | | | $ | 80.06 | | | $ | 64.64 | | | $ | 52.37 | | | $ | 53.50 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (1.06 | ) | | | (1.10 | ) | | | (1.02 | ) | | | (.64 | ) | | | (.59 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (.61 | ) | | | 10.01 | | | | 17.64 | | | | 12.91 | | | | (.54 | ) |
Total from investment operations | | | (1.67 | ) | | | 8.91 | | | | 16.62 | | | | 12.27 | | | | (1.13 | ) |
Less distributions from: |
Net realized gains | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Total distributions | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 82.23 | | | $ | 84.44 | | | $ | 80.06 | | | $ | 64.64 | | | $ | 52.37 | |
|
Total Returnb | | | (2.05 | %) | | | 11.93 | % | | | 25.85 | % | | | 23.41 | % | | | (2.11 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,796 | | | $ | 5,586 | | | $ | 6,409 | | | $ | 3,203 | | | $ | 2,234 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.17 | %) | | | (1.33 | %) | | | (1.37 | %) | | | (1.12 | %) | | | (1.12 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 165 | % | | | 255 | % | | | 270 | % | | | 320 | % | | | 388 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 92.40 | | | $ | 86.54 | | | $ | 69.27 | | | $ | 55.72 | | | $ | 56.54 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.47 | ) | | | (.64 | ) | | | (.46 | ) | | | (.30 | ) | | | (.23 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (.67 | ) | | | 11.03 | | | | 18.93 | | | | 13.85 | | | | (.59 | ) |
Total from investment operations | | | (1.14 | ) | | | 10.39 | | | | 18.47 | | | | 13.55 | | | | (.82 | ) |
Less distributions from: |
Net realized gains | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Total distributions | | | (.54 | ) | | | (4.53 | ) | | | (1.20 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 90.72 | | | $ | 92.40 | | | $ | 86.54 | | | $ | 69.27 | | | $ | 55.72 | |
|
Total Return | | | (1.30 | %) | | | 12.76 | % | | | 26.78 | % | | | 24.32 | % | | | (1.45 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,435 | | | $ | 12,846 | | | $ | 40,149 | | | $ | 21,504 | | | $ | 1,829 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.47 | %) | | | (0.71 | %) | | | (0.58 | %) | | | (0.46 | %) | | | (0.42 | %) |
Total expenses | | | 1.72 | % | | | 1.70 | % | | | 1.63 | % | | | 1.63 | % | | | 1.68 | % |
Portfolio turnover rate | | | 165 | % | | | 255 | % | | | 270 | % | | | 320 | % | | | 388 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights or periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 135 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
TELECOMMUNICATIONS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in the development, manufacture, or sale of communications services or communications equipment (“Telecommunications Companies”).
For the one-year period ended March 31, 2020, Telecommunications Fund Investor Class returned -10.74%, compared with -3.31% for the S&P 500 Telecommunications Services Index. The broader S&P 500 Index returned -6.98%.
Wireless telecommunication services was the only contributor to return. Communications equipment, integrated telecommunication services, and alternative carriers detracted the most from return.
Sprint Corp., T-Mobile US, Inc., and Cogent Communications Holdings, Inc. contributed the most to the Fund’s return for the period. Cisco Systems, Inc., Arista Networks, Inc., and ViaSat, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 1, 1998 |
A-Class | September 1, 2004 |
C-Class | April 18, 2001 |
H-Class | April 1, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Verizon Communications, Inc. | 14.0% |
AT&T, Inc. | 11.7% |
Cisco Systems, Inc. | 11.5% |
T-Mobile US, Inc. | 5.2% |
Sprint Corp. | 4.2% |
Arista Networks, Inc. | 3.9% |
Motorola Solutions, Inc. | 3.8% |
CenturyLink, Inc. | 2.7% |
Ubiquiti, Inc. | 2.6% |
Ciena Corp. | 2.4% |
Top Ten Total | 62.0% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
136 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (10.74%) | 1.62% | 2.90% |
A-Class Shares | (10.95%) | 1.34% | 2.65% |
A-Class Shares with sales charge‡ | (15.19%) | 0.35% | 2.15% |
C-Class Shares | (11.62%) | 0.59% | 1.98% |
C-Class Shares with CDSC§ | (12.47%) | 0.59% | 1.98% |
H-Class Shares** | (10.98%) | 1.37% | 2.53% |
S&P 500 Telecommunication Services Index | (3.31%) | 3.66% | 8.11% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P Telecommunication Services index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 137 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
TELECOMMUNICATIONS FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 100.2% |
| | | | | | | | | |
Telecommunications - 90.3% |
Verizon Communications, Inc. | | | 9,518 | | | $ | 511,402 | |
AT&T, Inc. | | | 14,626 | | | | 426,348 | |
Cisco Systems, Inc. | | | 10,715 | | | | 421,207 | |
T-Mobile US, Inc.* | | | 2,275 | | | | 190,872 | |
Sprint Corp.* | | | 17,644 | | | | 152,091 | |
Arista Networks, Inc.* | | | 700 | | | | 141,785 | |
Motorola Solutions, Inc. | | | 1,056 | | | | 140,364 | |
CenturyLink, Inc. | | | 10,396 | | | | 98,346 | |
Ubiquiti, Inc.1 | | | 670 | | | | 94,859 | |
Ciena Corp.* | | | 2,207 | | | | 87,861 | |
Juniper Networks, Inc. | | | 4,251 | | | | 81,364 | |
GCI Liberty, Inc. — Class A* | | | 1,416 | | | | 80,670 | |
Shenandoah Telecommunications Co. | | | 1,296 | | | | 63,828 | |
Acacia Communications, Inc.* | | | 900 | | | | 60,462 | |
Iridium Communications, Inc.* | | | 2,649 | | | | 59,152 | |
China Mobile Ltd. ADR | | | 1,500 | | | | 56,505 | |
EchoStar Corp. — Class A* | | | 1,737 | | | | 55,532 | |
BCE, Inc. | | | 1,302 | | | | 53,200 | |
Viavi Solutions, Inc.* | | | 4,375 | | | | 49,044 | |
Vodafone Group plc ADR | | | 3,551 | | | | 48,897 | |
America Movil SAB de CV — Class L ADR | | | 4,034 | | | | 47,520 | |
Vonage Holdings Corp.* | | | 6,503 | | | | 47,017 | |
Rogers Communications, Inc. — Class B | | | 1,109 | | | | 46,057 | |
TELUS Corp. | | | 2,844 | | | | 44,878 | |
Telephone & Data Systems, Inc. | | | 2,457 | | | | 41,179 | |
CommScope Holding Company, Inc.* | | | 4,275 | | | | 38,945 | |
InterDigital, Inc. | | | 865 | | | | 38,605 | |
Telefonica Brasil S.A. ADR | | | 4,021 | | | | 38,320 | |
ViaSat, Inc.* | | | 1,061 | | | | 38,111 | |
NETGEAR, Inc.* | | | 1,282 | | | | 29,281 | |
Plantronics, Inc. | | | 1,384 | | | | 13,923 | |
Total Telecommunications | | | | | | | 3,297,625 | |
| | | | | | | | | |
Internet - 5.0% |
Cogent Communications Holdings, Inc. | | | 976 | | | | 80,003 | |
F5 Networks, Inc.* | | | 742 | | | | 79,119 | |
Boingo Wireless, Inc.* | | | 2,283 | | | | 24,223 | |
Total Internet | | | | | | | 183,345 | |
| | | | | | | | | |
Computers - 3.6% |
Lumentum Holdings, Inc.* | | | 1,126 | | | | 82,986 | |
NetScout Systems, Inc.* | | | 2,000 | | | | 47,340 | |
Total Computers | | | | | | | 130,326 | |
| | | | | | | | | |
Software - 1.3% |
Bandwidth, Inc. — Class A* | | | 701 | | | | 47,170 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $3,750,447) | | | | | | | 3,658,466 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.5% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 13,417 | | | | 13,417 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 5,160 | | | | 5,160 | |
Total Repurchase Agreements | | | | |
(Cost $18,577) | | | | | | | 18,577 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 1.4% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 51,564 | | | | 51,564 | |
Total Securities Lending Collateral | | | | |
(Cost $51,564) | | | | | | | 51,564 | |
| | | | | | | | | |
Total Investments - 102.1% | | | | |
(Cost $3,820,588) | | $ | 3,728,607 | |
Other Assets & Liabilities, net - (2.1)% | | | (78,265 | ) |
Total Net Assets - 100.0% | | $ | 3,650,342 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
138 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
TELECOMMUNICATIONS FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 3,658,466 | | | $ | — | | | $ | — | | | $ | 3,658,466 | |
Repurchase Agreements | | | — | | | | 18,577 | | | | — | | | | 18,577 | |
Securities Lending Collateral | | | 51,564 | | | | — | | | | — | | | | 51,564 | |
Total Assets | | $ | 3,710,030 | | | $ | 18,577 | | | $ | — | | | $ | 3,728,607 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 139 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $50,261 of securities loaned (cost $3,802,011) | | $ | 3,710,030 | |
Repurchase agreements, at value (cost $18,577) | | | 18,577 | |
Cash | | | 14,894 | |
Receivables: |
Dividends | | | 5,091 | |
Fund shares sold | | | 114 | |
Securities lending income | | | 17 | |
Total assets | | | 3,748,723 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 51,564 | |
Fund shares redeemed | | | 34,402 | |
Management fees | | | 3,357 | |
Transfer agent and administrative fees | | | 1,202 | |
Portfolio accounting fees | | | 395 | |
Distribution and service fees | | | 219 | |
Trustees’ fees* | | | 111 | |
Miscellaneous | | | 7,131 | |
Total liabilities | | | 98,381 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 3,650,342 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 6,404,548 | |
Total distributable earnings (loss) | | | (2,754,206 | ) |
Net assets | | $ | 3,650,342 | |
| | | | | |
Investor Class: |
Net assets | | $ | 2,984,244 | |
Capital shares outstanding | | | 69,093 | |
Net asset value per share | | $ | 43.19 | |
| | | | | |
A-Class: |
Net assets | | $ | 445,735 | |
Capital shares outstanding | | | 11,314 | |
Net asset value per share | | $ | 39.40 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 41.36 | |
| | | | | |
C-Class: |
Net assets | | $ | 115,999 | |
Capital shares outstanding | | | 3,365 | |
Net asset value per share | | $ | 34.47 | |
| | | | | |
H-Class: |
Net assets | | $ | 104,364 | |
Capital shares outstanding | | | 2,721 | |
Net asset value per share | | $ | 38.36 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1,379) | | $ | 146,069 | |
Interest | | | 497 | |
Income from securities lending, net | | | 187 | |
Total investment income | | | 146,753 | |
| | | | | |
Expenses: |
Management fees | | | 44,671 | |
Distribution and service fees: |
A-Class | | | 1,413 | |
C-Class | | | 1,778 | |
H-Class | | | 904 | |
Transfer agent and administrative fees | | | 13,353 | |
Registration fees | | | 8,739 | |
Portfolio accounting fees | | | 5,255 | |
Professional fees | | | 3,072 | |
Custodian fees | | | 965 | |
Trustees’ fees* | | | 952 | |
Line of credit fees | | | 26 | |
Miscellaneous | | | 672 | |
Total expenses | | | 81,800 | |
Net investment income | | | 64,953 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (95,584 | ) |
Net realized loss | | | (95,584 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (901,647 | ) |
Net change in unrealized appreciation (depreciation) | | | (901,647 | ) |
Net realized and unrealized loss | | | (997,231 | ) |
Net decrease in net assets resulting from operations | | $ | (932,278 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
140 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 64,953 | | | $ | 143,466 | |
Net realized loss on investments | | | (95,584 | ) | | | (2,345,965 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (901,647 | ) | | | 281,163 | |
Net decrease in net assets resulting from operations | | | (932,278 | ) | | | (1,921,336 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (113,546 | ) | | | (19,936 | ) |
A-Class | | | (17,634 | ) | | | (1,268 | ) |
C-Class | | | (6,767 | ) | | | (740 | ) |
H-Class | | | (15,192 | ) | | | (26,326 | ) |
Total distributions to shareholders | | | (153,139 | ) | | | (48,270 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 24,964,902 | | | | 56,729,206 | |
A-Class | | | 623,152 | | | | 2,672,597 | |
C-Class | | | 1,848,670 | | | | 1,119,858 | |
H-Class | | | 1,719,340 | | | | 101,868,098 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 112,956 | | | | 19,788 | |
A-Class | | | 17,633 | | | | 1,268 | |
C-Class | | | 6,726 | | | | 722 | |
H-Class | | | 15,192 | | | | 26,326 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (24,123,207 | ) | | | (54,522,942 | ) |
A-Class | | | (640,505 | ) | | | (2,655,183 | ) |
C-Class | | | (1,966,664 | ) | | | (1,246,196 | ) |
H-Class | | | (1,924,759 | ) | | | (100,226,371 | ) |
Net increase from capital share transactions | | | 653,436 | | | | 3,787,171 | |
Net increase (decrease) in net assets | | | (431,981 | ) | | | 1,817,565 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 4,082,323 | | | | 2,264,758 | |
End of year | | $ | 3,650,342 | | | $ | 4,082,323 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 495,964 | | | | 1,158,535 | |
A-Class | | | 13,794 | | | | 59,475 | |
C-Class | | | 45,924 | | | | 27,570 | |
H-Class | | | 38,272 | | | | 2,399,817 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 2,364 | | | | 409 | |
A-Class | | | 404 | | | | 29 | |
C-Class | | | 176 | | | | 18 | |
H-Class | | | 358 | | | | 610 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (488,814 | ) | | | (1,126,821 | ) |
A-Class | | | (13,917 | ) | | | (58,699 | ) |
C-Class | | | (48,887 | ) | | | (30,837 | ) |
H-Class | | | (43,359 | ) | | | (2,396,248 | ) |
Net increase in shares | | | 2,279 | | | | 33,858 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 141 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 50.17 | | | $ | 47.66 | | | $ | 47.95 | | | $ | 42.91 | | | $ | 45.56 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .69 | | | | .46 | | | | .43 | | | | .49 | | | | .44 | |
Net gain (loss) on investments (realized and unrealized) | | | (5.91 | ) | | | 2.17 | c | | | 1.17 | | | | 5.55 | | | | (1.64 | ) |
Total from investment operations | | | (5.22 | ) | | | 2.63 | | | | 1.60 | | | | 6.04 | | | | (1.20 | ) |
Less distributions from: |
Net investment income | | | (1.76 | ) | | | (.02 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net realized gains | | | — | | | | (.10 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (1.76 | ) | | | (.12 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net asset value, end of period | | $ | 43.19 | | | $ | 50.17 | | | $ | 47.66 | | | $ | 47.95 | | | $ | 42.91 | |
|
Total Return | | | (10.74 | %) | | | 5.52 | % | | | 3.33 | % | | | 14.21 | % | | | (2.49 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,984 | | | $ | 2,989 | | | $ | 1,309 | | | $ | 12,539 | | | $ | 19,198 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.38 | % | | | 0.94 | % | | | 0.89 | % | | | 1.09 | % | | | 0.97 | % |
Total expenses | | | 1.48 | % | | | 1.47 | % | | | 1.38 | % | | | 1.38 | % | | | 1.34 | % |
Portfolio turnover rate | | | 561 | % | | | 2,115 | % | | | 1,455 | % | | | 605 | % | | | 660 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 46.03 | | | $ | 43.84 | | | $ | 44.39 | | | $ | 39.88 | | | $ | 42.63 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .31 | | | | .43 | | | | .20 | | | | .32 | | | | .58 | |
Net gain (loss) on investments (realized and unrealized) | | | (5.18 | ) | | | 1.88 | c | | | 1.14 | | | | 5.19 | | | | (1.88 | ) |
Total from investment operations | | | (4.87 | ) | | | 2.31 | | | | 1.34 | | | | 5.51 | | | | (1.30 | ) |
Less distributions from: |
Net investment income | | | (1.76 | ) | | | (.02 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net realized gains | | | — | | | | (.10 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (1.76 | ) | | | (.12 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net asset value, end of period | | $ | 39.40 | | | $ | 46.03 | | | $ | 43.84 | | | $ | 44.39 | | | $ | 39.88 | |
|
Total Returnb | | | (10.95 | %) | | | 5.27 | % | | | 3.08 | % | | | 13.88 | % | | | (2.90 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 446 | | | $ | 508 | | | $ | 448 | | | $ | 1,081 | | | $ | 1,544 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.69 | % | | | 0.96 | % | | | 0.45 | % | | | 0.75 | % | | | 1.41 | % |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.59 | % |
Portfolio turnover rate | | | 561 | % | | | 2,115 | % | | | 1,455 | % | | | 605 | % | | | 660 | % |
142 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 40.81 | | | $ | 39.17 | | | $ | 40.14 | | | $ | 36.43 | | | $ | 39.35 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .04 | | | | .06 | | | | (.09 | ) | | | .03 | | | | (.01 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (4.62 | ) | | | 1.70 | c | | | 1.01 | | | | 4.68 | | | | (1.46 | ) |
Total from investment operations | | | (4.58 | ) | | | 1.76 | | | | .92 | | | | 4.71 | | | | (1.47 | ) |
Less distributions from: |
Net investment income | | | (1.76 | ) | | | (.02 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net realized gains | | | — | | | | (.10 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (1.76 | ) | | | (.12 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net asset value, end of period | | $ | 34.47 | | | $ | 40.81 | | | $ | 39.17 | | | $ | 40.14 | | | $ | 36.43 | |
|
Total Returnb | | | (11.62 | %) | | | 4.49 | % | | | 2.30 | % | | | 13.05 | % | | | (3.59 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 116 | | | $ | 251 | | | $ | 368 | | | $ | 406 | | | $ | 248 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.10 | % | | | 0.15 | % | | | (0.22 | %) | | | 0.07 | % | | | (0.03 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 561 | % | | | 2,115 | % | | | 1,455 | % | | | 605 | % | | | 660 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016d | |
Per Share Data |
Net asset value, beginning of period | | $ | 44.88 | | | $ | 42.66 | | | $ | 43.21 | | | $ | 38.85 | | | $ | 41.59 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .44 | | | | 1.16 | | | | (.06 | ) | | | .58 | | | | .17 | |
Net gain (loss) on investments (realized and unrealized) | | | (5.20 | ) | | | 1.18 | c | | | 1.40 | | | | 4.78 | | | | (1.46 | ) |
Total from investment operations | | | (4.76 | ) | | | 2.34 | | | | 1.34 | | | | 5.36 | | | | (1.29 | ) |
Less distributions from: |
Net investment income | | | (1.76 | ) | | | (.02 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net realized gains | | | — | | | | (.10 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (1.76 | ) | | | (.12 | ) | | | (1.89 | ) | | | (1.00 | ) | | | (1.45 | ) |
Net asset value, end of period | | $ | 38.36 | | | $ | 44.88 | | | $ | 42.66 | | | $ | 43.21 | | | $ | 38.85 | |
|
Total Return | | | (10.98 | %) | | | 5.51 | % | | | 3.07 | % | | | 13.94 | % | | | (2.95 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 104 | | | $ | 334 | | | $ | 140 | | | $ | 1,213 | | | $ | 10,353 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.99 | % | | | 2.73 | % | | | (0.14 | %) | | | 1.44 | % | | | 0.44 | % |
Total expenses | | | 1.73 | % | | | 1.74 | % | | | 1.63 | % | | | 1.62 | % | | | 1.64 | % |
Portfolio turnover rate | | | 561 | % | | | 2,115 | % | | | 1,455 | % | | | 605 | % | | | 659 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
d | Effective September 30, 2015, the Fund’s Advisor Class were converted into H-Class Shares. The financial highlights for the periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 143 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
TRANSPORTATION FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in providing transportation services or companies engaged in the design, manufacture, distribution, or sale of transportation equipment (“Transportation Companies”).
For the one-year period ended March 31, 2020, Transportation Fund Investor Class returned -22.59%, compared with -19.47% for the S&P 500 Industrials Index. The broader S&P 500 Index returned -6.98%.
Airport services was the only contributor to return. Airlines, auto parts & equipment, and railroads detracted the most from return.
Tesla, Inc., Old Dominion Freight Line, Inc., and ZTO Express Cayman, Inc. ADR contributed the most to the Fund’s return for the period. General Motors Co., Delta Air Lines, Inc., and United Airlines Holdings, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 2, 1998 |
A-Class | September 1, 2004 |
C-Class | May 14, 2001 |
H-Class | June 9, 1998 |
Ten Largest Holdings (% of Total Net Assets) |
Tesla, Inc. | 8.2% |
Union Pacific Corp. | 6.7% |
United Parcel Service, Inc. — Class B | 5.4% |
Uber Technologies, Inc. | 4.5% |
CSX Corp. | 4.5% |
Norfolk Southern Corp. | 4.1% |
FedEx Corp. | 3.8% |
Old Dominion Freight Line, Inc. | 3.1% |
General Motors Co. | 3.1% |
Southwest Airlines Co. | 2.6% |
Top Ten Total | 46.0% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
144 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (22.59%) | (3.28%) | 6.36% |
A-Class Shares | (22.78%) | (3.52%) | 6.11% |
A-Class Shares with sales charge‡ | (26.44%) | (4.45%) | 5.59% |
C-Class Shares | (23.37%) | (4.25%) | 5.32% |
C-Class Shares with CDSC§ | (24.11%) | (4.25%) | 5.32% |
H-Class Shares** | (22.78%) | (3.54%) | 5.96% |
S&P 500 Industrials Index | (19.47%) | 2.97% | 8.58% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Industrials Index are unmanaged indices and unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class share will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 145 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
TRANSPORTATION FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.6% |
| | | | | | | | | |
Transportation - 50.1% |
Union Pacific Corp. | | | 2,831 | | | $ | 399,284 | |
United Parcel Service, Inc. — Class B | | | 3,441 | | | | 321,458 | |
CSX Corp. | | | 4,695 | | | | 269,023 | |
Norfolk Southern Corp. | | | 1,666 | | | | 243,236 | |
FedEx Corp. | | | 1,895 | | | | 229,788 | |
Old Dominion Freight Line, Inc. | | | 1,406 | | | | 184,552 | |
Kansas City Southern | | | 1,149 | | | | 146,130 | |
Expeditors International of Washington, Inc. | | | 2,134 | | | | 142,380 | |
J.B. Hunt Transport Services, Inc. | | | 1,369 | | | | 126,263 | |
CH Robinson Worldwide, Inc. | | | 1,906 | | | | 126,177 | |
ZTO Express Cayman, Inc. ADR | | | 3,928 | | | | 104,013 | |
Knight-Swift Transportation Holdings, Inc. | | | 3,138 | | | | 102,926 | |
Canadian Pacific Railway Ltd. | | | 427 | | | | 93,765 | |
Canadian National Railway Co. | | | 1,116 | | | | 86,635 | |
Landstar System, Inc. | | | 846 | | | | 81,098 | |
XPO Logistics, Inc.* | | | 1,560 | | | | 76,050 | |
Werner Enterprises, Inc. | | | 1,977 | | | | 71,686 | |
Saia, Inc.* | | | 770 | | | | 56,626 | |
Hub Group, Inc. — Class A* | | | 1,164 | | | | 52,927 | |
Kirby Corp.* | | | 1,157 | | | | 50,295 | |
Ryder System, Inc. | | | 1,431 | | | | 37,836 | |
Total Transportation | | | | | | | 3,002,148 | |
| | | | | | | | | |
Auto Manufacturers - 15.6% |
Tesla, Inc.* | | | 941 | | | | 493,084 | |
General Motors Co. | | | 8,840 | | | | 183,695 | |
Ford Motor Co. | | | 29,482 | | | | 142,398 | |
Ferrari N.V. | | | 499 | | | | 76,132 | |
Fiat Chrysler Automobiles N.V. | | | 5,592 | | | | 40,207 | |
Total Auto Manufacturers | | | | | | | 935,516 | |
| | | | | | | | | |
Airlines - 12.2% |
Southwest Airlines Co. | | | 4,428 | | | | 157,681 | |
Delta Air Lines, Inc. | | | 4,692 | | | | 133,863 | |
United Airlines Holdings, Inc.*,1 | | | 2,400 | | | | 75,720 | |
American Airlines Group, Inc.1 | | | 5,534 | | | | 67,460 | |
Alaska Air Group, Inc. | | | 1,902 | | | | 54,150 | |
JetBlue Airways Corp.* | | | 5,562 | | | | 49,780 | |
Ryanair Holdings plc ADR* | | | 924 | | | | 49,055 | |
Allegiant Travel Co. — Class A | | | 433 | | | | 35,419 | |
SkyWest, Inc. | | | 1,286 | | | | 33,680 | |
Copa Holdings S.A. — Class A | �� | | 730 | | | | 33,062 | |
Spirit Airlines, Inc.* | | | 1,814 | | | | 23,382 | |
Hawaiian Holdings, Inc. | | | 1,772 | | | | 18,500 | |
Total Airlines | | | | | | | 731,752 | |
| | | | | | | | | |
Auto Parts & Equipment - 8.9% |
Lear Corp. | | | 926 | | | | 75,237 | |
BorgWarner, Inc. | | | 3,067 | | | | 74,743 | |
Aptiv plc | | | 1,359 | | | | 66,917 | |
Dorman Products, Inc.* | | | 954 | | | | 52,728 | |
Magna International, Inc. | | | 1,481 | | | | 47,273 | |
Delphi Technologies plc* | | | 5,736 | | | | 46,175 | |
Autoliv, Inc. | | | 954 | | | | 43,894 | |
Visteon Corp.* | | | 791 | | | | 37,952 | |
Goodyear Tire & Rubber Co. | | | 5,580 | | | | 32,476 | |
Dana, Inc. | | | 3,975 | | | | 31,045 | |
Adient plc* | | | 2,921 | | | | 26,493 | |
Total Auto Parts & Equipment | | | | | | | 534,933 | |
| | | | | | | | | |
Internet - 6.2% |
Uber Technologies, Inc.* | | | 9,714 | | | | 271,215 | |
Lyft, Inc. — Class A* | | | 3,645 | | | | 97,868 | |
Total Internet | | | | | | | 369,083 | |
| | | | | | | | | |
Commercial Services - 2.5% |
AMERCO | | | 330 | | | | 95,881 | |
Avis Budget Group, Inc.* | | | 2,155 | | | | 29,955 | |
Hertz Global Holdings, Inc.* | | | 4,269 | | | | 26,382 | |
Total Commercial Services | | | | | | | 152,218 | |
| | | | | | | | | |
Leisure Time - 1.7% |
Harley-Davidson, Inc. | | | 2,913 | | | | 55,143 | |
Fox Factory Holding Corp.* | | | 1,082 | | | | 45,444 | |
Total Leisure Time | | | | | | | 100,587 | |
| | | | | | | | | |
Electronics - 1.5% |
Gentex Corp. | | | 4,211 | | | | 93,316 | |
| | | | | | | | | |
Home Builders - 0.9% |
Thor Industries, Inc. | | | 1,231 | | | | 51,923 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $6,576,049) | | | | | | | 5,971,476 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 19,166 | | | | 19,166 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 7,371 | | | | 7,371 | |
Total Repurchase Agreements | | | | |
(Cost $26,537) | | | | | | | 26,537 | |
146 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
TRANSPORTATION FUND | |
| | Shares | | | Value | |
SECURITIES LENDING COLLATERAL†,3 - 1.0% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 60,915 | | | $ | 60,915 | |
Total Securities Lending Collateral | | | | |
(Cost $60,915) | | | | | | | 60,915 | |
| | | | | | | | | |
Total Investments - 101.0% | | | | |
(Cost $6,663,501) | | $ | 6,058,928 | |
Other Assets & Liabilities, net - (1.0)% | | | (61,412 | ) |
Total Net Assets - 100.0% | | $ | 5,997,516 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 5,971,476 | | | $ | — | | | $ | — | | | $ | 5,971,476 | |
Repurchase Agreements | | | — | | | | 26,537 | | | | — | | | | 26,537 | |
Securities Lending Collateral | | | 60,915 | | | | — | | | | — | | | | 60,915 | |
Total Assets | | $ | 6,032,391 | | | $ | 26,537 | | | $ | — | | | $ | 6,058,928 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 147 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $61,767 of securities loaned (cost $6,636,964) | | $ | 6,032,391 | |
Repurchase agreements, at value (cost $26,537) | | | 26,537 | |
Cash | | | 21,841 | |
Receivables: |
Securities sold | | | 150,410 | |
Dividends | | | 2,767 | |
Foreign tax reclaims | | | 300 | |
Fund shares sold | | | 211 | |
Securities lending income | | | 21 | |
Total assets | | | 6,234,478 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 153,993 | |
Return of securities lending collateral | | | 60,915 | |
Management fees | | | 5,608 | |
Transfer agent and administrative fees | | | 2,238 | |
Distribution and service fees | | | 1,036 | |
Portfolio accounting fees | | | 660 | |
Trustees’ fees* | | | 190 | |
Miscellaneous | | | 12,322 | |
Total liabilities | | | 236,962 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 5,997,516 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 9,301,787 | |
Total distributable earnings (loss) | | | (3,304,271 | ) |
Net assets | | $ | 5,997,516 | |
| | | | | |
Investor Class: |
Net assets | | $ | 3,283,439 | |
Capital shares outstanding | | | 87,807 | |
Net asset value per share | | $ | 37.39 | |
| | | | | |
A-Class: |
Net assets | | $ | 1,757,094 | |
Capital shares outstanding | | | 51,960 | |
Net asset value per share | | $ | 33.82 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 35.51 | |
| | | | | |
C-Class: |
Net assets | | $ | 632,043 | |
Capital shares outstanding | | | 20,960 | |
Net asset value per share | | $ | 30.15 | |
| | | | | |
H-Class: |
Net assets | | $ | 324,940 | |
Capital shares outstanding | | | 9,936 | |
Net asset value per share | | $ | 32.70 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1,656) | | $ | 286,246 | |
Interest | | | 1,365 | |
Income from securities lending, net | | | 524 | |
Total investment income | | | 288,135 | |
| | | | | |
Expenses: |
Management fees | | | 119,294 | |
Distribution and service fees: |
A-Class | | | 8,413 | |
C-Class | | | 13,293 | |
H-Class | | | 1,471 | |
Transfer agent and administrative fees | | | 35,675 | |
Portfolio accounting fees | | | 14,035 | |
Registration fees | | | 13,897 | |
Professional fees | | | 5,927 | |
Trustees’ fees* | | | 3,352 | |
Custodian fees | | | 2,194 | |
Line of credit fees | | | 46 | |
Miscellaneous | | | 13,079 | |
Total expenses | | | 230,676 | |
Net investment income | | | 57,459 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 1,024,892 | |
Net realized gain | | | 1,024,892 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (3,939,790 | ) |
Net change in unrealized appreciation (depreciation) | | | (3,939,790 | ) |
Net realized and unrealized loss | | | (2,914,898 | ) |
Net decrease in net assets resulting from operations | | $ | (2,857,439 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
148 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 57,459 | | | $ | 8,472 | |
Net realized gain on investments | | | 1,024,892 | | | | 1,335,509 | |
Net change in unrealized appreciation (depreciation) on investments | | | (3,939,790 | ) | | | (3,063,248 | ) |
Net decrease in net assets resulting from operations | | | (2,857,439 | ) | | | (1,719,267 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (342,945 | ) | | | (1,010,270 | ) |
A-Class | | | (187,023 | ) | | | (383,942 | ) |
C-Class | | | (58,531 | ) | | | (201,966 | ) |
H-Class | | | (21,428 | ) | | | (62,557 | ) |
Total distributions to shareholders | | | (609,927 | ) | | | (1,658,735 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 61,127,966 | | | | 88,665,130 | |
A-Class | | | 7,233,790 | | | | 6,766,786 | |
C-Class | | | 1,125,341 | | | | 1,542,021 | |
H-Class | | | 10,568,259 | | | | 45,730,425 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 328,816 | | | | 967,012 | |
A-Class | | | 182,137 | | | | 377,924 | |
C-Class | | | 57,266 | | | | 195,596 | |
H-Class | | | 20,968 | | | | 61,336 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (63,728,261 | ) | | | (96,051,965 | ) |
A-Class | | | (8,147,172 | ) | | | (9,156,572 | ) |
C-Class | | | (1,742,657 | ) | | | (2,449,793 | ) |
H-Class | | | (10,652,942 | ) | | | (47,030,659 | ) |
Net decrease from capital share transactions | | | (3,626,489 | ) | | | (10,382,759 | ) |
Net decrease in net assets | | | (7,093,855 | ) | | | (13,760,761 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 13,091,371 | | | | 26,852,132 | |
End of year | | $ | 5,997,516 | | | $ | 13,091,371 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 1,157,931 | | | | 1,536,445 | |
A-Class | | | 147,945 | | | | 125,939 | |
C-Class | | | 26,473 | | | | 31,916 | |
H-Class | | | 236,551 | | | | 858,575 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 6,317 | | | | 20,042 | |
A-Class | | | 3,866 | | | | 8,599 | |
C-Class | | | 1,360 | | | | 4,919 | |
H-Class | | | 460 | | | | 1,441 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (1,236,077 | ) | | | (1,677,779 | ) |
A-Class | | | (169,311 | ) | | | (170,903 | ) |
C-Class | | | (42,772 | ) | | | (52,091 | ) |
H-Class | | | (237,384 | ) | | | (886,172 | ) |
Net decrease in shares | | | (104,641 | ) | | | (199,069 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 149 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 50.08 | | | $ | 59.10 | | | $ | 53.52 | | | $ | 46.23 | | | $ | 52.06 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .30 | | | | .09 | | | | (.04 | ) | | | .09 | | | | .16 | |
Net gain (loss) on investments (realized and unrealized) | | | (11.07 | ) | | | (4.02 | ) | | | 6.85 | | | | 7.37 | | | | (5.78 | ) |
Total from investment operations | | | (10.77 | ) | | | (3.93 | ) | | | 6.81 | | | | 7.46 | | | | (5.62 | ) |
Less distributions from: |
Net investment income | | | (.15 | ) | | | — | | | | — | | | | (.17 | ) | | | (.21 | ) |
Net realized gains | | | (1.77 | ) | | | (5.09 | ) | | | (1.23 | ) | | | — | | | | — | |
Total distributions | | | (1.92 | ) | | | (5.09 | ) | | | (1.23 | ) | | | (.17 | ) | | | (.21 | ) |
Net asset value, end of period | | $ | 37.39 | | | $ | 50.08 | | | $ | 59.10 | | | $ | 53.52 | | | $ | 46.23 | |
|
Total Return | | | (22.59 | %) | | | (6.33 | %) | | | 12.67 | % | | | 16.14 | % | | | (10.80 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,283 | | | $ | 7,994 | | | $ | 16,603 | | | $ | 32,911 | | | $ | 13,638 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.58 | % | | | 0.16 | % | | | (0.07 | %) | | | 0.17 | % | | | 0.33 | % |
Total expenses | | | 1.48 | % | | | 1.46 | % | | | 1.37 | % | | | 1.38 | % | | | 1.34 | % |
Portfolio turnover rate | | | 483 | % | | | 476 | % | | | 483 | % | | | 676 | % | | | 219 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 45.58 | | | $ | 54.43 | | | $ | 49.50 | | | $ | 42.87 | | | $ | 48.41 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .17 | | | | (.01 | ) | | | (.07 | ) | | | (.06 | ) | | | .04 | |
Net gain (loss) on investments (realized and unrealized) | | | (10.01 | ) | | | (3.75 | ) | | | 6.23 | | | | 6.86 | | | | (5.37 | ) |
Total from investment operations | | | (9.84 | ) | | | (3.76 | ) | | | 6.16 | | | | 6.80 | | | | (5.33 | ) |
Less distributions from: |
Net investment income | | | (.15 | ) | | | — | | | | — | | | | (.17 | ) | | | (.21 | ) |
Net realized gains | | | (1.77 | ) | | | (5.09 | ) | | | (1.23 | ) | | | — | | | | — | |
Total distributions | | | (1.92 | ) | | | (5.09 | ) | | | (1.23 | ) | | | (.17 | ) | | | (.21 | ) |
Net asset value, end of period | | $ | 33.82 | | | $ | 45.58 | | | $ | 54.43 | | | $ | 49.50 | | | $ | 42.87 | |
|
Total Returnb | | | (22.78 | %) | | | (6.57 | %) | | | 12.38 | % | | | 15.87 | % | | | (11.01 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,757 | | | $ | 3,166 | | | $ | 5,760 | | | $ | 4,742 | | | $ | 5,339 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.37 | % | | | (0.03 | %) | | | (0.12 | %) | | | (0.12 | %) | | | 0.08 | % |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.63 | % | | | 1.60 | % |
Portfolio turnover rate | | | 483 | % | | | 476 | % | | | 483 | % | | | 676 | % | | | 219 | % |
150 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 41.14 | | | $ | 50.04 | | | $ | 45.93 | | | $ | 40.09 | | | $ | 45.63 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.18 | ) | | | (.41 | ) | | | (.43 | ) | | | (.34 | ) | | | (.24 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (8.89 | ) | | | (3.40 | ) | | | 5.77 | | | | 6.35 | | | | (5.09 | ) |
Total from investment operations | | | (9.07 | ) | | | (3.81 | ) | | | 5.34 | | | | 6.01 | | | | (5.33 | ) |
Less distributions from: |
Net investment income | | | (.15 | ) | | | — | | | | — | | | | (.17 | ) | | | (.21 | ) |
Net realized gains | | | (1.77 | ) | | | (5.09 | ) | | | (1.23 | ) | | | — | | | | — | |
Total distributions | | | (1.92 | ) | | | (5.09 | ) | | | (1.23 | ) | | | (.17 | ) | | | (.21 | ) |
Net asset value, end of period | | $ | 30.15 | | | $ | 41.14 | | | $ | 50.04 | | | $ | 45.93 | | | $ | 40.09 | |
|
Total Returnb | | | (23.37 | %) | | | (7.27 | %) | | | 11.56 | % | | | 15.00 | % | | | (11.69 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 632 | | | $ | 1,477 | | | $ | 2,560 | | | $ | 2,307 | | | $ | 2,977 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.43 | %) | | | (0.87 | %) | | | (0.87 | %) | | | (0.81 | %) | | | (0.57 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.38 | % | | | 2.35 | % |
Portfolio turnover rate | | | 483 | % | | | 476 | % | | | 483 | % | | | 676 | % | | | 219 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 44.14 | | | $ | 52.90 | | | $ | 48.15 | | | $ | 41.71 | | | $ | 47.12 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.02 | ) | | | (.02 | ) | | | (.13 | ) | | | (.13 | ) | | | (.09 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (9.50 | ) | | | (3.65 | ) | | | 6.11 | | | | 6.74 | | | | (5.11 | ) |
Total from investment operations | | | (9.52 | ) | | | (3.67 | ) | | | 5.98 | | | | 6.61 | | | | (5.20 | ) |
Less distributions from: |
Net investment income | | | (.15 | ) | | | — | | | | — | | | | (.17 | ) | | | (.21 | ) |
Net realized gains | | | (1.77 | ) | | | (5.09 | ) | | | (1.23 | ) | | | — | | | | — | |
Total distributions | | | (1.92 | ) | | | (5.09 | ) | | | (1.23 | ) | | | (.17 | ) | | | (.21 | ) |
Net asset value, end of period | | $ | 32.70 | | | $ | 44.14 | | | $ | 52.90 | | | $ | 48.15 | | | $ | 41.71 | |
|
Total Return | | | (22.78 | %) | | | (6.61 | %) | | | 12.33 | % | | | 15.88 | % | | | (11.04 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 325 | | | $ | 455 | | | $ | 1,929 | | | $ | 4,127 | | | $ | 9,031 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.03 | %) | | | (0.04 | %) | | | (0.24 | %) | | | (0.30 | %) | | | (0.20 | %) |
Total expenses | | | 1.72 | % | | | 1.69 | % | | | 1.63 | % | | | 1.63 | % | | | 1.72 | % |
Portfolio turnover rate | | | 483 | % | | | 476 | % | | | 483 | % | | | 676 | % | | | 219 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class share were converted into H-Class shares. The financial highlights for periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 151 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
UTILITIES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that operate public utilities (“Utilities Companies”).
For the one-year period ended March 31, 2020, Utilities Fund Investor Class returned -8.74%, compared with -1.40% for the S&P 500 Utilities Index. The broader S&P 500 Index returned -6.98%.
Water utilities were the largest contributor to return, followed by the renewable electricity and oil & gas storage & transportation. Multi-utilities, electric utilities, and gas utilities detracted the most from return.
NextEra Energy, Inc., Southern Co., and American Water Works Co. contributed the most to the Fund’s return for the period. PG&E Corp., UGI Corp., and CenterPoint Energy, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Investor Class | April 3, 2000 |
A-Class | September 1, 2004 |
C-Class | April 27, 2001 |
H-Class | April 3, 2000 |
Ten Largest Holdings (% of Total Net Assets) |
NextEra Energy, Inc. | 6.6% |
Duke Energy Corp. | 4.5% |
Dominion Energy, Inc. | 4.4% |
Southern Co. | 4.3% |
American Electric Power Company, Inc. | 3.5% |
Xcel Energy, Inc. | 3.3% |
Exelon Corp. | 3.3% |
WEC Energy Group, Inc. | 3.1% |
Eversource Energy | 3.0% |
Sempra Energy | 2.9% |
Top Ten Total | 38.9% |
| | |
“Ten Largest Holdings” excludes any temporary cash investments. |
152 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (8.74%) | 5.61% | 8.75% |
A-Class Shares | (8.96%) | 5.35% | 8.48% |
A-Class Shares with sales charge‡ | (13.29%) | 4.33% | 7.95% |
C-Class Shares | (9.65%) | 4.57% | 7.66% |
C-Class Shares with CDSC§ | (10.55%) | 4.57% | 7.66% |
H-Class Shares** | (8.97%) | 5.34% | 8.34% |
S&P 500 Utilities Index | (1.40%) | 8.28% | 10.59% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Utilities Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class and H-Class shares will vary due to differences in fee structures. |
** | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 153 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
UTILITIES FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.9% |
| | | | | | | | | |
Electric - 82.9% |
NextEra Energy, Inc. | | | 12,585 | | | $ | 3,028,203 | |
Duke Energy Corp. | | | 25,235 | | | | 2,041,007 | |
Dominion Energy, Inc. | | | 27,958 | | | | 2,018,288 | |
Southern Co. | | | 36,183 | | | | 1,958,948 | |
American Electric Power Company, Inc. | | | 20,230 | | | | 1,617,995 | |
Xcel Energy, Inc. | | | 25,300 | | | | 1,525,590 | |
Exelon Corp. | | | 41,199 | | | | 1,516,535 | |
WEC Energy Group, Inc. | | | 16,290 | | | | 1,435,638 | |
Eversource Energy | | | 17,350 | | | | 1,356,944 | |
Sempra Energy | | | 11,852 | | | | 1,339,157 | |
Consolidated Edison, Inc. | | | 16,943 | | | | 1,321,554 | |
FirstEnergy Corp. | | | 29,364 | | | | 1,176,616 | |
Public Service Enterprise Group, Inc. | | | 26,070 | | | | 1,170,804 | |
Ameren Corp. | | | 16,014 | | | | 1,166,300 | |
CMS Energy Corp. | | | 18,835 | | | | 1,106,556 | |
Edison International | | | 19,629 | | | | 1,075,473 | |
Entergy Corp. | | | 11,407 | | | | 1,071,916 | |
DTE Energy Co. | | | 10,735 | | | | 1,019,503 | |
PPL Corp. | | | 39,878 | | | | 984,189 | |
Avangrid, Inc. | | | 21,762 | | | | 952,740 | |
Evergy, Inc. | | | 16,725 | | | | 920,711 | |
Alliant Energy Corp. | | | 18,756 | | | | 905,727 | |
Pinnacle West Capital Corp. | | | 9,876 | | | | 748,502 | |
AES Corp. | | | 50,971 | | | | 693,206 | |
Vistra Energy Corp. | | | 39,332 | | | | 627,739 | |
NRG Energy, Inc. | | | 21,921 | | | | 597,566 | |
CenterPoint Energy, Inc. | | | 38,265 | | | | 591,194 | |
OGE Energy Corp. | | | 18,793 | | | | 577,509 | |
PG&E Corp.* | | | 62,579 | | | | 562,585 | |
Portland General Electric Co. | | | 11,121 | | | | 533,141 | |
IDACORP, Inc. | | | 6,047 | | | | 530,866 | |
Black Hills Corp. | | | 7,841 | | | | 502,059 | |
NorthWestern Corp. | | | 7,376 | | | | 441,306 | |
ALLETE, Inc. | | | 7,015 | | | | 425,670 | |
PNM Resources, Inc. | | | 11,017 | | | | 418,646 | |
Total Electric | | | | | | | 37,960,383 | |
| | | | | | | | | |
Gas - 10.2% |
Atmos Energy Corp. | | | 9,136 | | | | 906,565 | |
NiSource, Inc. | | | 32,452 | | | | 810,326 | |
ONE Gas, Inc. | | | 6,591 | | | | 551,139 | |
Southwest Gas Holdings, Inc. | | | 7,421 | | | | 516,205 | |
Spire, Inc. | | | 6,881 | | | | 512,497 | |
UGI Corp. | | | 18,968 | | | | 505,877 | |
National Fuel Gas Co. | | | 11,936 | | | | 445,093 | |
New Jersey Resources Corp. | | | 12,948 | | | | 439,844 | |
Total Gas | | | | | | | 4,687,546 | |
| | | | | | | | | |
Water - 4.5% |
American Water Works Company, Inc. | | | 10,753 | | | | 1,285,628 | |
Essential Utilities, Inc. | | | 19,094 | | | | 777,126 | |
Total Water | | | | | | | 2,062,754 | |
| | | | | | | | | |
Energy-Alternate Sources - 1.2% |
TerraForm Power, Inc. — Class A | | | 34,208 | | | | 539,460 | |
| | | | | | | | | |
Building Materials - 1.1% |
MDU Resources Group, Inc. | | | 23,096 | | | | 496,564 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $45,023,504) | | | | | | | 45,746,707 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,1 - 0.2% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 72,539 | | | | 72,539 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 27,900 | | | | 27,900 | |
Total Repurchase Agreements | | | | |
(Cost $100,439) | | | | | | | 100,439 | |
| | | | | | | | | |
Total Investments - 100.1% | | | | |
(Cost $45,123,943) | | $ | 45,847,146 | |
Other Assets & Liabilities, net - (0.1)% | | | (29,321 | ) |
Total Net Assets - 100.0% | | $ | 45,817,825 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
| | |
| | See Sector Classification in Other Information section. |
154 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
UTILITIES FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 45,746,707 | | | $ | — | | | $ | — | | | $ | 45,746,707 | |
Repurchase Agreements | | | — | | | | 100,439 | | | | — | | | | 100,439 | |
Total Assets | | $ | 45,746,707 | | | $ | 100,439 | | | $ | — | | | $ | 45,847,146 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 155 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value (cost $45,023,504) | | $ | 45,746,707 | |
Repurchase agreements, at value (cost $100,439) | | | 100,439 | |
Cash | | | 80,523 | |
Receivables: |
Dividends | | | 108,793 | |
Fund shares sold | | | 59,425 | |
Total assets | | | 46,095,887 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 140,051 | |
Management fees | | | 35,877 | |
Transfer agent and administrative fees | | | 13,922 | |
Distribution and service fees | | | 5,937 | |
Portfolio accounting fees | | | 4,221 | |
Trustees’ fees* | | | 1,187 | |
Miscellaneous | | | 76,867 | |
Total liabilities | | | 278,062 | |
Commitments and contingent liabilities (Note 9) | | | — | |
Net assets | | $ | 45,817,825 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 49,473,189 | |
Total distributable earnings (loss) | | | (3,655,364 | ) |
Net assets | | $ | 45,817,825 | |
| | | | | |
Investor Class: |
Net assets | | $ | 34,072,744 | |
Capital shares outstanding | | | 815,116 | |
Net asset value per share | | $ | 41.80 | |
| | | | | |
A-Class: |
Net assets | | $ | 4,224,900 | |
Capital shares outstanding | | | 110,298 | |
Net asset value per share | | $ | 38.30 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 40.21 | |
| | | | | |
C-Class: |
Net assets | | $ | 5,092,726 | |
Capital shares outstanding | | | 160,150 | |
Net asset value per share | | $ | 31.80 | |
| | | | | |
H-Class: |
Net assets | | $ | 2,427,455 | |
Capital shares outstanding | | | 65,854 | |
Net asset value per share | | $ | 36.86 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $162) | | $ | 2,908,865 | |
Interest | | | 9,821 | |
Income from securities lending, net | | | 321 | |
Total investment income | | | 2,919,007 | |
| | | | | |
Expenses: |
Management fees | | | 825,548 | |
Distribution and service fees: |
A-Class | | | 14,939 | |
C-Class | | | 65,769 | |
H-Class | | | 10,642 | |
Transfer agent and administrative fees | | | 246,178 | |
Portfolio accounting fees | | | 97,122 | |
Registration fees | | | 87,101 | |
Professional fees | | | 57,845 | |
Trustees’ fees* | | | 24,748 | |
Custodian fees | | | 13,904 | |
Line of credit fees | | | 624 | |
Miscellaneous | | | 79,851 | |
Total expenses | | | 1,524,271 | |
Net investment income | | | 1,394,736 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 9,293,608 | |
Net realized gain | | | 9,293,608 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (14,274,698 | ) |
Net change in unrealized appreciation (depreciation) | | | (14,274,698 | ) |
Net realized and unrealized loss | | | (4,981,090 | ) |
Net decrease in net assets resulting from operations | | $ | (3,586,354 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
156 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 1,394,736 | | | $ | 965,922 | |
Net realized gain (loss) on investments | | | 9,293,608 | | | | (5,232,520 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (14,274,698 | ) | | | 12,114,697 | |
Net increase (decrease) in net assets resulting from operations | | | (3,586,354 | ) | | | 7,848,099 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (798,786 | ) | | | — | |
A-Class | | | (57,991 | ) | | | — | |
C-Class | | | (78,736 | ) | | | — | |
H-Class | | | (30,409 | ) | | | — | |
Total distributions to shareholders | | | (965,922 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 218,676,498 | | | | 323,470,925 | |
A-Class | | | 4,286,695 | | | | 22,705,354 | |
C-Class | | | 3,360,227 | | | | 3,526,128 | |
H-Class | | | 17,514,422 | | | | 57,147,601 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 795,101 | | | | — | |
A-Class | | | 55,451 | | | | — | |
C-Class | | | 77,101 | | | | — | |
H-Class | | | 30,102 | | | | — | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (287,798,066 | ) | | | (232,777,368 | ) |
A-Class | | | (5,302,118 | ) | | | (21,114,229 | ) |
C-Class | | | (4,212,655 | ) | | | (4,556,272 | ) |
H-Class | | | (20,710,730 | ) | | | (52,476,424 | ) |
Net increase (decrease) from capital share transactions | | | (73,227,972 | ) | | | 95,925,715 | |
Net increase (decrease) in net assets | | | (77,780,248 | ) | | | 103,773,814 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 123,598,073 | | | | 19,824,259 | |
End of year | | $ | 45,817,825 | | | $ | 123,598,073 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 4,503,840 | | | | 7,609,327 | |
A-Class | | | 99,339 | | | | 589,193 | |
C-Class | | | 90,910 | | | | 107,447 | |
H-Class | | | 411,293 | | | | 1,572,817 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 16,472 | | | | — | |
A-Class | | | 1,253 | | | | — | |
C-Class | | | 2,093 | | | | — | |
H-Class | | | 707 | | | | — | |
Shares redeemed | | | | | | | | |
Investor Class | | | (5,986,116 | ) | | | (5,559,152 | ) |
A-Class | | | (122,823 | ) | | | (553,480 | ) |
C-Class | | | (114,995 | ) | | | (140,076 | ) |
H-Class | | | (493,579 | ) | | | (1,448,772 | ) |
Net increase (decrease) in shares | | | (1,591,606 | ) | | | 2,177,304 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 157 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 46.23 | | | $ | 39.03 | | | $ | 39.34 | | | $ | 40.23 | | | $ | 36.98 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .74 | | | | .77 | | | | .68 | | | | .59 | | | | .73 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.72 | ) | | | 6.43 | | | | .06 | | | | 2.25 | | | | 3.09 | |
Total from investment operations | | | (3.98 | ) | | | 7.20 | | | | .74 | | | | 2.84 | | | | 3.82 | |
Less distributions from: |
Net investment income | | | (.45 | ) | | | — | | | | (.53 | ) | | | (.87 | ) | | | (.57 | ) |
Net realized gains | | | — | | | | — | | | | (.52 | ) | | | (2.86 | ) | | | — | |
Total distributions | | | (.45 | ) | | | — | | | | (1.05 | ) | | | (3.73 | ) | | | (.57 | ) |
Net asset value, end of period | | $ | 41.80 | | | $ | 46.23 | | | $ | 39.03 | | | $ | 39.34 | | | $ | 40.23 | |
|
Total Return | | | (8.74 | %) | | | 18.45 | % | | | 1.72 | % | | | 8.04 | % | | | 10.61 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 34,073 | | | $ | 105,443 | | | $ | 9,006 | | | $ | 24,116 | | | $ | 50,753 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.53 | % | | | 1.80 | % | | | 1.67 | % | | | 1.47 | % | | | 2.00 | % |
Total expenses | | | 1.48 | % | | | 1.48 | % | | | 1.38 | % | | | 1.38 | % | | | 1.35 | % |
Portfolio turnover rate | | | 169 | % | | | 390 | % | | | 452 | % | | | 507 | % | | | 475 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 42.50 | | | $ | 35.97 | | | $ | 36.43 | | | $ | 37.63 | | | $ | 34.70 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .57 | | | | .47 | | | | .54 | | | | .45 | | | | .63 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.32 | ) | | | 6.06 | | | | .05 | | | | 2.08 | | | | 2.87 | |
Total from investment operations | | | (3.75 | ) | | | 6.53 | | | | .59 | | | | 2.53 | | | | 3.50 | |
Less distributions from: |
Net investment income | | | (.45 | ) | | | — | | | | (.53 | ) | | | (.87 | ) | | | (.57 | ) |
Net realized gains | | | — | | | | — | | | | (.52 | ) | | | (2.86 | ) | | | — | |
Total distributions | | | (.45 | ) | | | — | | | | (1.05 | ) | | | (3.73 | ) | | | (.57 | ) |
Net asset value, end of period | | $ | 38.30 | | | $ | 42.50 | | | $ | 35.97 | | | $ | 36.43 | | | $ | 37.63 | |
|
Total Returnb | | | (8.96 | %) | | | 18.15 | % | | | 1.45 | % | | | 7.75 | % | | | 10.38 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 4,225 | | | $ | 5,633 | | | $ | 3,482 | | | $ | 9,362 | | | $ | 22,448 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.29 | % | | | 1.21 | % | | | 1.43 | % | | | 1.20 | % | | | 1.85 | % |
Total expenses | | | 1.73 | % | | | 1.72 | % | | | 1.63 | % | | | 1.63 | % | | | 1.60 | % |
Portfolio turnover rate | | | 169 | % | | | 390 | % | | | 452 | % | | | 507 | % | | | 475 | % |
158 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 35.63 | | | $ | 30.39 | | | $ | 31.15 | | | $ | 32.96 | | | $ | 30.70 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .21 | | | | .26 | | | | .25 | | | | .22 | | | | .28 | |
Net gain (loss) on investments (realized and unrealized) | | | (3.59 | ) | | | 4.98 | | | | .04 | | | | 1.70 | | | | 2.55 | |
Total from investment operations | | | (3.38 | ) | | | 5.24 | | | | .29 | | | | 1.92 | | | | 2.83 | |
Less distributions from: |
Net investment income | | | (.45 | ) | | | — | | | | (.53 | ) | | | (.87 | ) | | | (.57 | ) |
Net realized gains | | | — | | | | — | | | | (.52 | ) | | | (2.86 | ) | | | — | |
Total distributions | | | (.45 | ) | | | — | | | | (1.05 | ) | | | (3.73 | ) | | | (.57 | ) |
Net asset value, end of period | | $ | 31.80 | | | $ | 35.63 | | | $ | 30.39 | | | $ | 31.15 | | | $ | 32.96 | |
|
Total Returnb | | | (9.65 | %) | | | 17.24 | % | | | 0.69 | % | | | 6.97 | % | | | 9.55 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 5,093 | | | $ | 6,489 | | | $ | 6,526 | | | $ | 8,270 | | | $ | 10,438 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.57 | % | | | 0.79 | % | | | 0.78 | % | | | 0.69 | % | | | 0.94 | % |
Total expenses | | | 2.47 | % | | | 2.46 | % | | | 2.38 | % | | | 2.37 | % | | | 2.35 | % |
Portfolio turnover rate | | | 169 | % | | | 390 | % | | | 452 | % | | | 507 | % | | | 475 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 40.92 | | | $ | 34.64 | | | $ | 35.12 | | | $ | 36.40 | | | $ | 33.61 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .50 | | | | .57 | | | | .31 | | | | .41 | | | | .54 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.11 | ) | | | 5.71 | | | | .26 | | | | 2.04 | | | | 2.82 | |
Total from investment operations | | | (3.61 | ) | | | 6.28 | | | | .57 | | | | 2.45 | | | | 3.36 | |
Less distributions from: |
Net investment income | | | (.45 | ) | | | — | | | | (.53 | ) | | | (.87 | ) | | | (.57 | ) |
Net realized gains | | | — | | | | — | | | | (.52 | ) | | | (2.86 | ) | | | — | |
Total distributions | | | (.45 | ) | | | — | | | | (1.05 | ) | | | (3.73 | ) | | | (.57 | ) |
Net asset value, end of period | | $ | 36.86 | | | $ | 40.92 | | | $ | 34.64 | | | $ | 35.12 | | | $ | 36.40 | |
|
Total Return | | | (8.97 | %) | | | 18.13 | % | | | 1.44 | % | | | 7.80 | % | | | 10.31 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,427 | | | $ | 6,033 | | | $ | 810 | | | $ | 5,379 | | | $ | 6,448 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.18 | % | | | 1.51 | % | | | 0.85 | % | | | 1.13 | % | | | 1.65 | % |
Total expenses | | | 1.73 | % | | | 1.72 | % | | | 1.63 | % | | | 1.62 | % | | | 1.68 | % |
Portfolio turnover rate | | | 169 | % | | | 390 | % | | | 452 | % | | | 507 | % | | | 475 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Effective September 30, 2015, the Fund’s Advisor Class shares were converted into H-Class shares. The financial highlights for the periods prior to that date reflect the performance of the former Advisor Class. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 159 |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of seven separate classes of shares: Investor Class shares, A-Class shares, C-Class shares, H-Class shares, P-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. C-Class shares of each Fund automatically convert to A-Class shares of the same Fund on or about the 10th day of the month following the 10-year anniversary of the purchase of the C-Class shares. This conversion will be executed without any sales charge, fee or other charge. After the conversion is completed, the shares will be subject to all features and expenses of A-Class shares. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares require a minimum initial investment of $2 million and a minimum account balance of $1 million. At March 31, 2020, the Trust consisted of fifty-two funds.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment
Company Type |
Banking Fund | Diversified |
Basic Materials Fund | Diversified |
Biotechnology Fund | Non-diversified |
Consumer Products Fund | Diversified |
Electronics Fund | Non-diversified |
Energy Fund | Diversified |
Energy Services Fund | Non-diversified |
Financial Services Fund | Diversified |
Health Care Fund | Diversified |
Internet Fund | Diversified |
Leisure Fund | Diversified |
Precious Metals Fund | Non-diversified |
Real Estate Fund | Diversified |
Retailing Fund | Diversified |
Technology Fund | Diversified |
Telecommunications Fund | Non-diversified |
Transportation Fund | Diversified |
Utilities Fund | Diversified |
At March 31, 2020, Investor Class, A-Class, C-Class and H-Class shares have been issued by the Funds.
The Funds invest in a specific industry sector. To the extent that investments are concentrated in a single sector, the Funds are subject to legislative or regulatory changes, adverse market conditions and/or increased competition affecting such sector.
The Funds seek capital appreciation and invest substantially all of their assets in equity securities of companies involved in their sector.
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
160 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The NAV of each Class of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, attributable to the Class by the number of outstanding shares of the Class.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds are valued at the last quoted sale price.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis.
(b) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain or loss and unrealized appreciation or depreciation on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized appreciation and depreciation arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
| | THE RYDEX FUNDS ANNUAL REPORT | 161 |
NOTES TO FINANCIAL STATEMENTS (continued) |
(c) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of March 31, 2020, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(d) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(e) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares, unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(f) Class Allocations
Interest and dividend income, most expenses, all realized gains and losses, and all unrealized appreciation and depreciation are allocated to the classes based upon the value of the outstanding shares in each Class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust based on the respective net assets of each Fund included in the Trust.
(g) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.08% at March 31, 2020.
(h) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | | Management Fees
(as a % of Net Assets) | |
Banking Fund | | | 0.85 | % |
Basic Materials Fund | | | 0.85 | % |
Biotechnology Fund | | | 0.85 | % |
Consumer Products Fund | | | 0.85 | % |
Electronics Fund | | | 0.85 | % |
Energy Fund | | | 0.85 | % |
Energy Services Fund | | | 0.85 | % |
Financial Services Fund | | | 0.85 | % |
Health Care Fund | | | 0.85 | % |
Internet Fund | | | 0.85 | % |
Leisure Fund | | | 0.85 | % |
Precious Metals Fund | | | 0.75 | % |
Real Estate Fund | | | 0.85 | % |
Retailing Fund | | | 0.85 | % |
Technology Fund | | | 0.85 | % |
Telecommunications Fund | | | 0.85 | % |
Transportation Fund | | | 0.85 | % |
Utilities Fund | | | 0.85 | % |
162 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
When the aggregate assets of each series of the Trust (excluding the Long Short Equity Fund, Managed Futures Strategy Fund and Multi-Hedge Strategies Fund) and each series of Rydex Dynamic Funds equal or exceed $10 billion, the advisory fee rate paid by each individual Fund will be reduced in accordance with the asset level and breakpoint schedule set forth below.
Fund Assets Under Management | | Fund Asset-Based
Breakpoint Reductions | |
$500 million - $1 billion | | | 0.025 | % |
> $1 billion - $2 billion | | | 0.050 | % |
> $2 billion | | | 0.075 | % |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted a Distribution Plan applicable to A-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Funds will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services.
The Board has adopted a separate Distribution and Shareholder Services Plan applicable to its C-Class shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates a shareholder’s financial adviser for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial adviser an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial adviser. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2020, GFD retained sales charges of $122,345 relating to sales of A-Class shares of the Trust.
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
Note 3 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
| | THE RYDEX FUNDS ANNUAL REPORT | 163 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended March 31, 2020 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Return of
Capital | | | Total
Distributions | |
Banking Fund | | $ | 179,656 | | | $ | — | | | $ | — | | | $ | 179,656 | |
Basic Materials Fund | | | 1,119,758 | | | | 341,784 | | | | — | | | | 1,461,542 | |
Biotechnology Fund | | | — | | | | 9,558,792 | | | | — | | | | 9,558,792 | |
Consumer Products Fund | | | 2,524,545 | | | | 1,441,214 | | | | — | | | | 3,965,759 | |
Electronics Fund | | | 7,066 | | | | — | | | | — | | | | 7,066 | |
Energy Fund | | | 148,596 | | | | — | | | | — | | | | 148,596 | |
Energy Services Fund | | | 8,234 | | | | — | | | | — | | | | 8,234 | |
Financial Services Fund | | | 115,290 | | | | — | | | | — | | | | 115,290 | |
Internet Fund | | | — | | | | 903,814 | | | | — | | | | 903,814 | |
Leisure Fund | | | 41,159 | | | | — | | | | — | | | | 41,159 | |
Precious Metals Fund | | | 2,055,112 | | | | — | | | | — | | | | 2,055,112 | |
Real Estate Fund | | | 248,692 | | | | — | | | | — | | | | 248,692 | |
Technology Fund | | | — | | | | 329,115 | | | | — | | | | 329,115 | |
Telecommunications Fund | | | 153,139 | | | | — | | | | — | | | | 153,139 | |
Transportation Fund | | | 139,337 | | | | 470,590 | | | | — | | | | 609,927 | |
Utilities Fund | | | 965,922 | | | | ��� | | | | — | | | | 965,922 | |
The tax character of distributions paid during the year ended March 31, 2019 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Return of
Capital | | | Total
Distributions | |
Banking Fund | | $ | 287,899 | | | $ | — | | | $ | — | | | $ | 287,899 | |
Basic Materials Fund | | | 142,839 | | | | 350,894 | | | | — | | | | 493,733 | |
Biotechnology Fund | | | 9,243,980 | | | | 18,197,049 | | | | — | | | | 27,441,029 | |
Consumer Products Fund | | | 2,350,055 | | | | 8,911,883 | | | | — | | | | 11,261,938 | |
Electronics Fund | | | 1,986,759 | | | | — | | | | — | | | | 1,986,759 | |
Energy Fund | | | 297,240 | | | | — | | | | — | | | | 297,240 | |
Energy Services Fund | | | 144,265 | | | | — | | | | — | | | | 144,265 | |
Financial Services Fund | | | 433,322 | | | | 1,103,518 | | | | — | | | | 1,536,840 | |
Health Care Fund | | | 1,811,754 | | | | — | | | | — | | | | 1,811,754 | |
Internet Fund | | | 3,115,314 | | | | — | | | | — | | | | 3,115,314 | |
Leisure Fund | | | 890,230 | | | | 2,363 | | | | — | | | | 892,593 | |
Precious Metals Fund | | | 618,560 | | | | — | | | | — | | | | 618,560 | |
Real Estate Fund | | | 336,150 | | | | — | | | | — | | | | 336,150 | |
Retailing Fund | | | 72,312 | | | | — | | | | — | | | | 72,312 | |
Technology Fund | | | 4,525,368 | | | | — | | | | — | | | | 4,525,368 | |
Telecommunications Fund | | | 48,270 | | | | — | | | | — | | | | 48,270 | |
Transportation Fund | | | 1,658,735 | | | | — | | | | — | | | | 1,658,735 | |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
164 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax components of distributable earnings/(loss) as of March 31, 2020 were as follows:
Fund | | Undistributed
Ordinary
Income | | | Undistributed
Long-Term
Capital Gain | | | Net Unrealized
Appreciation
(Depreciation) | | | Accumulated
Capital and
Other Losses | | | Other
Temporary
Differences | | | Total | |
Banking Fund | | $ | 273,567 | | | $ | — | | | $ | (12,671,278 | ) | | $ | (1,428,893 | ) | | $ | — | | | $ | (13,826,604 | ) |
Basic Materials Fund | | | — | | | | — | | | | (3,593,788 | ) | | | (1,606,895 | ) | | | (130,382 | ) | | | (5,331,065 | ) |
Biotechnology Fund | | | 530,216 | | | | 13,301,693 | | | | 58,000,139 | | | | — | | | | — | | | | 71,832,048 | |
Consumer Products Fund | | | 2,194,882 | | | | 5,232,949 | | | | 27,342,953 | | | | — | | | | — | | | | 34,770,784 | |
Electronics Fund | | | — | | | | 946,545 | | | | 615,443 | | | | (42,169 | ) | | | — | | | | 1,519,819 | |
Energy Fund | | | 292,058 | | | | — | | | | (14,673,393 | ) | | | (17,317,719 | ) | | | — | | | | (31,699,054 | ) |
Energy Services Fund | | | 84,822 | | | | — | | | | (8,989,382 | ) | | | (28,794,545 | ) | | | — | | | | (37,699,105 | ) |
Financial Services Fund | | | — | | | | — | | | | (632,218 | ) | | | — | | | | — | | | | (632,218 | ) |
Health Care Fund | | | — | | | | — | | | | (2,286,306 | ) | | | (23,032 | ) | | | — | | | | (2,309,338 | ) |
Internet Fund | | | — | | | | — | | | | (441,857 | ) | | | (1,199,219 | ) | | | — | | | | (1,641,076 | ) |
Leisure Fund | | | — | | | | — | | | | (814,545 | ) | | | — | | | | — | | | | (814,545 | ) |
Precious Metals Fund | | | 1,336,241 | | | | — | | | | (23,909,458 | ) | | | (31,361,995 | ) | | | (276,532 | ) | | | (54,211,744 | ) |
Real Estate Fund | | | 261,411 | | | | — | | | | (1,415,548 | ) | | | (5,519,636 | ) | | | — | | | | (6,673,773 | ) |
Retailing Fund | | | — | | | | — | | | | (1,869,336 | ) | | | (303,025 | ) | | | — | | | | (2,172,361 | ) |
Technology Fund | | | — | | | | 1,060,519 | | | | 9,113,514 | | | | (530,986 | ) | | | — | | | | 9,643,047 | |
Telecommunications Fund | | | 7,010 | | | | — | | | | (1,261,111 | ) | | | (1,500,105 | ) | | | — | | | | (2,754,206 | ) |
Transportation Fund | | | — | | | | — | | | | (1,893,294 | ) | | | (1,410,977 | ) | | | — | | | | (3,304,271 | ) |
Utilities Fund | | | 757,521 | | | | — | | | | (4,412,885 | ) | | | — | | | | — | | | | (3,655,364 | ) |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. Under the RIC Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. As of March 31, 2020, capital loss carryforwards for the Funds were as follows:
| | Unlimited | | | Total
| |
| Fund | | | Short-Term | | | Long-Term | | | | Capital Loss
Carryforward | |
Banking Fund | | $ | (1,324,816 | ) | | $ | (104,077 | ) | | $ | (1,428,893 | ) |
Basic Materials Fund | | | (1,401,021 | ) | | | (205,874 | ) | | | (1,606,895 | ) |
Energy Fund | | | (5,150,716 | ) | | | (12,167,003 | ) | | | (17,317,719 | ) |
Energy Services Fund | | | (18,285,783 | ) | | | (10,508,762 | ) | | | (28,794,545 | ) |
Internet Fund | | | (1,122,826 | ) | | | — | | | | (1,122,826 | ) |
Precious Metals Fund | | | (5,155,166 | ) | | | (26,206,829 | ) | | | (31,361,995 | ) |
Real Estate Fund | | | (3,529,316 | ) | | | (1,990,320 | ) | | | (5,519,636 | ) |
Telecommunications Fund | | | (1,500,105 | ) | | | — | | | | (1,500,105 | ) |
For the year ended March 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | | Utilized | |
Banking Fund | | $ | 498,636 | |
Basic Materials Fund | | | 953,197 | |
Electronics Fund | | | 2,767,002 | |
Health Care Fund | | | 2,945,217 | |
Leisure Fund | | | 53,110 | |
Precious Metals Fund | | | 776,911 | |
Retailing Fund | | | 943,593 | |
Telecommunications Fund | | | 91,532 | |
Utilities Fund | | | 1,256,332 | |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, distributions in excess of taxable income, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received,
| | THE RYDEX FUNDS ANNUAL REPORT | 165 |
NOTES TO FINANCIAL STATEMENTS (continued) |
and the “mark-to-market,” recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax treatment of net operating losses, corporate actions, and foreign capital gains taxes. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of March 31, 2020 for permanent book/tax differences:
Fund | | Paid In
Capital | | | Total
Distributable
Earnings/(Loss) | |
Basic Materials Fund | | $ | (788,594 | ) | | $ | 788,594 | |
Biotechnology Fund | | | 13,269,249 | | | | (13,269,249 | ) |
Consumer Products Fund | | | 4,377,757 | | | | (4,377,757 | ) |
Electronics Fund | | | 602,037 | | | | (602,037 | ) |
Financial Services Fund | | | 975,495 | | | | (975,495 | ) |
Health Care Fund | | | 2,071,233 | | | | (2,071,233 | ) |
Internet Fund | | | (421,344 | ) | | | 421,344 | |
Leisure Fund | | | 1,942,565 | | | | (1,942,565 | ) |
Real Estate Fund | | | 24,381 | | | | (24,381 | ) |
Retailing Fund | | | 3,364,483 | | | | (3,364,483 | ) |
Technology Fund | | | 4,678,136 | | | | (4,678,136 | ) |
Transportation Fund | | | 1,802,684 | | | | (1,802,684 | ) |
Utilities Fund | | | 7,337,419 | | | | (7,337,419 | ) |
At March 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | | Tax
Cost | | | Tax
Unrealized
Appreciation | | | Tax
Unrealized
Depreciation | | | Net Unrealized
Appreciation/
(Depreciation) | |
Banking Fund | | $ | 34,009,929 | | | $ | — | | | $ | (12,671,278 | ) | | $ | (12,671,278 | ) |
Basic Materials Fund | | | 22,977,256 | | | | 1,517,364 | | | | (5,111,152 | ) | | | (3,593,788 | ) |
Biotechnology Fund | | | 97,609,021 | | | | 68,909,411 | | | | (10,909,272 | ) | | | 58,000,139 | |
Consumer Products Fund | | | 76,716,242 | | | | 31,729,192 | | | | (4,386,239 | ) | | | 27,342,953 | |
Electronics Fund | | | 44,241,602 | | | | 3,416,869 | | | | (2,801,426 | ) | | | 615,443 | |
Energy Fund | | | 21,044,186 | | | | — | | | | (14,673,393 | ) | | | (14,673,393 | ) |
Energy Services Fund | | | 11,477,622 | | | | — | | | | (8,989,382 | ) | | | (8,989,382 | ) |
Financial Services Fund | | | 10,604,558 | | | | 1,112,476 | | | | (1,744,694 | ) | | | (632,218 | ) |
Health Care Fund | | | 22,219,724 | | | | — | | | | (2,286,306 | ) | | | (2,286,306 | ) |
Internet Fund | | | 16,395,044 | | | | 658,948 | | | | (1,100,805 | ) | | | (441,857 | ) |
Leisure Fund | | | 5,894,235 | | | | 332,033 | | | | (1,146,578 | ) | | | (814,545 | ) |
Precious Metals Fund | | | 90,686,220 | | | | — | | | | (23,909,458 | ) | | | (23,909,458 | ) |
Real Estate Fund | | | 4,945,753 | | | | 12,615 | | | | (1,428,163 | ) | | | (1,415,548 | ) |
Retailing Fund | | | 6,295,053 | | | | — | | | | (1,869,336 | ) | | | (1,869,336 | ) |
Technology Fund | | | 26,870,426 | | | | 10,087,807 | | | | (974,293 | ) | | | 9,113,514 | |
Telecommunications Fund | | | 4,989,718 | | | | — | | | | (1,261,111 | ) | | | (1,261,111 | ) |
Transportation Fund | | | 7,952,222 | | | | 215,576 | | | | (2,108,870 | ) | | | (1,893,294 | ) |
Utilities Fund | | | 50,260,031 | | | | 760,121 | | | | (5,173,006 | ) | | | (4,412,885 | ) |
166 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Pursuant to U.S. federal income tax regulations applicable to regulated investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2020, the following losses reflected in the accompanying financial statements were deferred for Federal income tax purposes until April 1, 2020:
Fund | | Ordinary | | | Capital | |
Electronics Fund | | $ | (42,169 | ) | | $ | — | |
Health Care Fund | | | (23,032 | ) | | | — | |
Internet Fund | | | (76,393 | ) | | | — | |
Retailing Fund | | | — | | | | (303,025 | ) |
Technology Fund | | | — | | | | (530,986 | ) |
Transportation Fund | | | — | | | | (1,410,977 | ) |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
| | THE RYDEX FUNDS ANNUAL REPORT | 167 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 5 – Securities Transactions
For the year ended March 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | | Purchases | | | Sales | |
Banking Fund | | $ | 90,768,914 | | | $ | 70,792,370 | |
Basic Materials Fund | | | 21,938,025 | | | | 34,779,994 | |
Biotechnology Fund | | | 120,529,503 | | | | 174,299,465 | |
Consumer Products Fund | | | 90,078,463 | | | | 157,426,346 | |
Electronics Fund | | | 160,830,485 | | | | 144,903,337 | |
Energy Fund | | | 73,801,924 | | | | 78,074,802 | |
Energy Services Fund | | | 71,159,747 | | | | 75,126,166 | |
Financial Services Fund | | | 58,245,690 | | | | 60,933,110 | |
Health Care Fund | | | 102,155,783 | | | | 160,025,624 | |
Internet Fund | | | 115,965,380 | | | | 123,601,910 | |
Leisure Fund | | | 54,492,451 | | | | 62,742,576 | |
Precious Metals Fund | | | 224,412,914 | | | | 214,257,800 | |
Real Estate Fund | | | 117,060,413 | | | | 131,717,264 | |
Retailing Fund | | | 32,450,041 | | | | 61,400,293 | |
Technology Fund | | | 122,821,958 | | | | 170,459,120 | |
Telecommunications Fund | | | 26,248,402 | | | | 25,652,273 | |
Transportation Fund | | | 65,782,417 | | | | 69,856,468 | |
Utilities Fund | | | 162,399,942 | | | | 234,664,407 | |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended March 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | | Purchases | | | Sales | | | Realized
Gain (Loss) | |
Banking Fund | | $ | 5,545,432 | | | $ | 5,988,236 | | | $ | (50,010 | ) |
Basic Materials Fund | | | 2,465,685 | | | | 4,576,033 | | | | 240,459 | |
Biotechnology Fund | | | 5,446,077 | | | | 12,009,616 | | | | 2,861,192 | |
Consumer Products Fund | | | 11,322,697 | | | | 9,997,936 | | | | 673,959 | |
Electronics Fund | | | 21,390,140 | | | | 17,340,703 | | | | 966,846 | |
Energy Fund | | | 6,824,652 | | | | 5,348,510 | | | | (708,541 | ) |
Energy Services Fund | | | 6,216,775 | | | | 4,677,034 | | | | (532,194 | ) |
Financial Services Fund | | | 10,386,399 | | | | 9,611,374 | | | | 266,685 | |
Health Care Fund | | | 15,196,016 | | | | 25,039,013 | | | | 1,203,817 | |
Internet Fund | | | 21,195,570 | | | | 13,253,724 | | | | 388,423 | |
Leisure Fund | | | 9,166,531 | | | | 6,465,569 | | | | 138,798 | |
Precious Metals Fund | | | 10,907,053 | | | | 10,581,241 | | | | (67,938 | ) |
Real Estate Fund | | | 10,470,654 | | | | 10,045,328 | | | | 139,826 | |
Retailing Fund | | | 5,964,699 | | | | 5,487,832 | | | | 379,041 | |
Technology Fund | | | 22,706,674 | | | | 27,922,149 | | | | 1,541,457 | |
Telecommunications Fund | | | 4,270,017 | | | | 2,330,790 | | | | 49,818 | |
Transportation Fund | | | 4,671,993 | | | | 5,295,324 | | | | (1,280 | ) |
Utilities Fund | | | 11,721,121 | | | | 7,694,259 | | | | 433,185 | |
168 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At March 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and
Terms of Agreement | | Face Value | | | Repurchase Price | | | Collateral | | Par Value | | | Fair Value | |
J.P. Morgan Securities LLC | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.01% | | | | | | | | | | 2.00% | | | | | | | | |
Due 04/01/20 | | $ | 129,371,353 | | | $ | 129,371,389 | | | 11/30/22 | | $ | 125,405,900 | | | $ | 131,958,818 | |
| | | | | | | | | | | | | | | | | | | |
BofA Securities, Inc. | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.00% | | | | | | | | | | 2.13% | | | | | | | | |
Due 04/01/20 | | | 49,758,213 | | | | 49,758,213 | | | 08/15/21 | | | 49,322,100 | | | | 50,753,381 | |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
| | THE RYDEX FUNDS ANNUAL REPORT | 169 |
NOTES TO FINANCIAL STATEMENTS (continued) |
At March 31, 2020, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
| | | Gross Amounts Not Offset in the
Statements of Assets and Liabilities | | | | Securities Lending Collateral | |
Fund | | Value of
Securities
Loaned | | | Collateral
Received(a) | | | Net
Amount | | | | Cash
Collateral
Invested | | | Cash
Collateral
Uninvested | | | Total
Collateral | |
Banking Fund | | $ | 43,752 | | | $ | (43,752 | ) | | $ | — | | | | $ | 46,079 | | | $ | — | | | $ | 46,079 | |
Basic Materials Fund | | | 623,426 | | | | (623,426 | ) | | | — | | | | | 641,991 | | | | — | | | | 641,991 | |
Biotechnology Fund | | | 1,090,544 | | | | (1,090,544 | ) | | | — | | | | | 1,830,522 | | | | — | | | | 1,830,522 | |
Consumer Products Fund | | | 1,997,674 | | | | (1,997,674 | ) | | | — | | | | | 2,038,986 | | | | — | | | | 2,038,986 | |
Electronics Fund | | | 375,984 | | | | (375,984 | ) | | | — | | | | | 382,670 | | | | — | | | | 382,670 | |
Energy Fund | | | 80,316 | | | | (80,316 | ) | | | — | | | | | 82,547 | | | | — | | | | 82,547 | |
Energy Services Fund | | | 71,231 | | | | (71,231 | ) | | | — | | | | | 76,274 | | | | — | | | | 76,274 | |
Health Care Fund | | | 186,466 | | | | (186,466 | ) | | | — | | | | | 207,901 | | | | — | | | | 207,901 | |
Internet Fund | | | 372,658 | | | | (372,658 | ) | | | — | | | | | 380,695 | | | | — | | | | 380,695 | |
Leisure Fund | | | 83,959 | | | | (82,215 | ) | | | 1,744 | | | | | 82,215 | * | | | — | | | | 82,215 | |
Precious Metals Fund | | | 3,888,207 | | | | (3,888,207 | ) | | | — | | | | | 4,212,644 | | | | — | | | | 4,212,644 | |
Real Estate Fund | | | 22,369 | | | | (22,369 | ) | | | — | | | | | 24,081 | | | | — | | | | 24,081 | |
Retailing Fund | | | 100,476 | | | | (98,999 | ) | | | 1,477 | | | | | 98,999 | * | | | — | | | | 98,999 | |
Technology Fund | | | 254,399 | | | | (254,399 | ) | | | — | | | | | 265,039 | | | | — | | | | 265,039 | |
Telecommunications Fund | | | 50,261 | | | | (50,261 | ) | | | — | | | | | 51,564 | | | | — | | | | 51,564 | |
Transportation Fund | | | 61,767 | | | | (60,915 | ) | | | 852 | | | | | 60,915 | * | | | — | | | | 60,915 | |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
* | Subsequent to March 31, 2020, additional collateral was received. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 3.02% for the year ended March 31, 2020. On March 31, 2020, the Health Care Fund borrowed $85,000 under this agreement. The remaining Funds did not have any borrowings outstanding under this agreement at March 31, 2020.
170 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended March 31, 2020, were as follows:
Fund | | Average Daily Balance | |
Banking Fund | | $ | 1,530 | |
Basic Materials Fund | | | 519 | |
Biotechnology Fund | | | 34,705 | |
Consumer Products Fund | | | 6,855 | |
Electronics Fund | | | 3,199 | |
Energy Fund | | | 4,336 | |
Energy Services Fund | | | 6,705 | |
Financial Services Fund | | | 1,262 | |
Health Care Fund | | | 2,052 | |
Internet Fund | | | 216 | |
Leisure Fund | | | 3,973 | |
Precious Metals Fund | | | 391 | |
Real Estate Fund | | | 5,505 | |
Retailing Fund | | | 2,620 | |
Technology Fund | | | 4,590 | |
Telecommunications Fund | | | 883 | |
Transportation Fund | | | 1,760 | |
Utilities Fund | | | 20,697 | |
Note 9 – Legal Proceedings
Tribune Company
Rydex Series Funds has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Series Funds of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Series Funds, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments.
| | THE RYDEX FUNDS ANNUAL REPORT | 171 |
NOTES TO FINANCIAL STATEMENTS (continued) |
On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The plaintiff requested that the Court direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
172 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (concluded) |
Note 10 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 11 – Subsequent Events
Share Splits
On May 18, 2020, the Board approved reverse share splits as follows:
Fund | Effective Date | Split Type |
Energy Fund | August 7, 2020 | One-for-Three Reverse Split |
Energy Services Fund | August 7, 2020 | One-for-Fifteen Reverse Split |
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events other than the one disclosed above, that would require adjustment to or disclosure in the Funds’ financial statements.
| | THE RYDEX FUNDS ANNUAL REPORT | 173 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Banking Fund, Basic Materials Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund, Precious Metals Fund, Real Estate Fund, Retailing Fund, Technology Fund, Telecommunications Fund, Transportation Fund and Utilities Fund and the Board of Trustees of Rydex Series Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Banking Fund, Basic Materials Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund, Precious Metals Fund, Real Estate Fund, Retailing Fund, Technology Fund, Telecommunications Fund, Transportation Fund and Utilities Fund (collectively referred to as the “Funds”), (eighteen of the funds constituting Rydex Series Funds (the “Trust”)), including the schedules of investments, as of March 31, 2020, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (eighteen of the funds constituting Rydex Series Funds) at March 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
May 28, 2020
174 | THE RYDEX FUNDS ANNUAL REPORT | |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2020, the following funds had the corresponding percentages qualify for the reduced tax rate pursuant to the Jobs and Growth Tax Relief and Reconciliation Act of 2003 or for the dividends received deduction for corporations. See the qualified dividend income and dividend received deduction columns, respectively, in the table below.
Additionally, of the taxable ordinary income distributions paid during the fiscal year ended March 31, 2020, the following funds had the corresponding percentages qualify as qualified short-term capital gains as permitted by IRC Section 871(k)(2). See qualified short-term capital gain column in the table below.
Fund | | Qualified
Dividend
Income | | | Dividend
Received
Deduction | | | Qualified
Short-Term
Capital Gain | |
Banking Fund | | | 100.00 | % | | | 100.00 | % | | | 0.00 | % |
Basic Materials Fund | | | 100.00 | % | | | 100.00 | % | | | 100.00 | % |
Consumer Products Fund | | | 100.00 | % | | | 97.55 | % | | | 100.00 | % |
Electronics Fund | | | 100.00 | % | | | 100.00 | % | | | 0.00 | % |
Energy Fund | | | 100.00 | % | | | 100.00 | % | | | 0.00 | % |
Energy Services Fund | | | 100.00 | % | | | 25.22 | % | | | 0.00 | % |
Financial Services Fund | | | 29.76 | % | | | 100.00 | % | | | 0.00 | % |
Leisure Fund | | | 100.00 | % | | | 100.00 | % | | | 0.00 | % |
Precious Metals Fund | | | 14.25 | % | | | 14.57 | % | | | 0.00 | % |
Real Estate Fund | | | 16.90 | % | | | 17.18 | % | | | 0.00 | % |
Telecommunications Fund | | | 85.94 | % | | | 81.08 | % | | | 0.00 | % |
Transportation Fund | | | 100.00 | % | | | 100.00 | % | | | 100.00 | % |
Utilities Fund | | | 100.00 | % | | | 100.00 | % | | | 0.00 | % |
With respect to the taxable year ended March 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | | From long-term
capital gain: | | | From long-term capital
gain, using proceeds
from shareholder
redemptions: | |
Basic Materials Fund | | $ | 341,784 | | | $ | — | |
Biotechnology Fund | | | 9,558,792 | | | | 13,269,249 | |
Consumer Products Fund | | | 1,441,214 | | | | 4,377,757 | |
Electronics Fund | | | — | | | | 602,037 | |
Financial Services Fund | | | — | | | | 241,098 | |
Health Care Fund | | | — | | | | 2,262,271 | |
Internet Fund | | | 903,814 | | | | — | |
Leisure Fund | | | — | | | | 1,851,142 | |
Retailing Fund | | | — | | | | 3,023,164 | |
Technology Fund | | | 329,115 | | | | 4,678,136 | |
Transportation Fund | | | 470,590 | | | | 1,802,684 | |
Utilities Fund | | | — | | | | 4,189,762 | |
| | THE RYDEX FUNDS ANNUAL REPORT | 175 |
OTHER INFORMATION (Unaudited)(concluded) |
Proposed regulations dated January 18, 2019 enable a regulated investment company to pay Section 199A dividends to its shareholders. Section 199A, enacted as part of the Tax Cuts and Jobs Act of 2017, may allow non-corporate tax payers a deduction of up to 20% of qualified business income from flow-through entities, including dividends from real estate investment trusts. The qualifying percentage of the Funds’ ordinary income and short-term capital gain distributions, if any, for the purposes of the Section 199A deduction was 36.40% for Financial Services Fund and 74.25% for Real Estate Fund.
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
176 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES | | | |
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 | Current: Retired
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chair of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chair of the Contracts Review Committee | Since 2005 (Trustee) Since 2019 (Vice Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
| | THE RYDEX FUNDS ANNUAL REPORT | 177 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES - concluded | | |
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018-present); Edward-Elmhurst Healthcare System (2012-present).
Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020) Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019 (Chair of the Audit Committee) | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020) Managed Duration Investment Grade Municipal Fund (2003-2016). |
178 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INTERESTED TRUSTEE | | | | |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019 (Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | Each Trustee also serves on the boards of trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Managed Duration Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Funds and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the board of trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
| | THE RYDEX FUNDS ANNUAL REPORT | 179 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS | | | |
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
180 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS - concluded | |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
| | THE RYDEX FUNDS ANNUAL REPORT | 181 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
| | ● | We use your information in connection with servicing your accounts. |
| | ● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
| | ● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
| | ● | We use information for security purposes. We may use your information to protect our company and our customers. |
| | ● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
| | ● | We use information as otherwise permitted by law, as we may notify you. |
| | ● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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3.31.2020
Rydex Funds Annual Report
Domestic Equity Funds |
Nova Fund |
S&P 500® Fund |
Inverse S&P 500® Strategy Fund |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund |
Inverse NASDAQ-100® Strategy Fund |
Mid-Cap 1.5x Strategy Fund |
Inverse Mid-Cap Strategy Fund |
Russell 2000® 1.5x Strategy Fund |
Russell 2000® Fund |
Inverse Russell 2000® Strategy Fund |
Dow Jones Industrial Average® Fund |
Fixed Income Funds |
Government Long Bond 1.2x Strategy Fund |
Inverse Government Long Bond Strategy Fund |
High Yield Strategy Fund |
Inverse High Yield Strategy Fund |
Money Market Fund |
U.S. Government Money Market Fund |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports may no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from a fund electronically by calling 800.820.0888, going to GuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a fund directly, you can inform the Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RTB1-ANN-0320x0321 |
| | |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
NOVA FUND | 12 |
S&P 500® FUND | 27 |
INVERSE S&P 500® STRATEGY FUND | 40 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | 49 |
INVERSE NASDAQ-100® STRATEGY FUND | 59 |
MID-CAP 1.5x STRATEGY FUND | 68 |
INVERSE MID-CAP STRATEGY FUND | 80 |
RUSSELL 2000® 1.5x STRATEGY FUND | 88 |
RUSSELL 2000® FUND | 97 |
INVERSE RUSSELL 2000® STRATEGY FUND | 105 |
DOW JONES INDUSTRIAL AVERAGE® FUND | 113 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | 122 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | 132 |
HIGH YIELD STRATEGY FUND | 144 |
INVERSE HIGH YIELD STRATEGY FUND | 154 |
U.S. GOVERNMENT MONEY MARKET FUND | 163 |
NOTES TO FINANCIAL STATEMENTS | 169 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 190 |
OTHER INFORMATION | 192 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 194 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 199 |
| | THE RYDEX FUNDS ANNUAL REPORT | 1 |
Dear Shareholder:
The fiscal year ended March 31, 2020, concluded on a somber note. Even though markets performed well for most of the period, the emergence of a novel and highly contagious form of coronavirus in the last weeks of the period adversely impacted global commercial activity and contributed to significant volatility in certain markets, unseen since the great recession of 2008.
As it spread beyond Asia to virtually every country in the world, many governments and businesses instituted quarantines and closures, which has resulted in significant disruption in manufacturing, supply chains, consumer demand and economic activity. The U.S. Federal Reserve responded quickly to provide liquidity in order to ensure that the U.S. markets continued to function efficiently. The fiscal policy included a spending bill worth over $2 trillion to assist consumers, states, small businesses and certain industries. While these actions helped stabilize the market, volatile conditions continued into April.
As discussed in this annual shareholder report, these events have affected performance of many of our funds (the “Fund” or “Funds”). We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
Security Investors, LLC (the “Investment Adviser”), the Investment Adviser for the Funds, is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm. An affiliate of Guggenheim and the Investment Adviser, Guggenheim Funds Distributors, LLC, is the distributor of the Funds.
Together, we are committed to the safety and prosperity of our clients, our employees, and our shareholders. The resources of the firm are being made fully available not only to support our clients, but also to support our employees and their families.
Please practice the appropriate prudence for the protection not only of your health and that of your friends and loved ones but also for our neighbors and communities. Thank you for the trust you place in us.
Sincerely,
Security Investors, LLC
April 30, 2020
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in the Funds are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Inverse and leveraged Funds are not suitable for all investors. ● These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● Inverse Funds involve certain risks, which include increased volatility due to the Funds’ possible use of short sales of securities and derivatives, such as options and futures. ● The Funds’ use of derivatives, such as futures, options and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Short-selling involves increased risks and costs. You risk paying more for a security than you received from its sale. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the Funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those Funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark.
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Due to the compounding of daily returns, leveraged and inverse Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those Funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The Funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the prospectus.
The Government Long Bond 1.2x Strategy and Inverse Government Long Bond Strategy funds are not suitable for all investors. ● These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, and (c) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Funds’ use of derivatives, such as futures, options and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the Funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those Funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those Funds that consistently apply leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The Funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged Funds’ holdings consistent with their strategies, as frequently as daily. ● In general, bond prices rise when interest rates fall, and vice versa. Moreover, while securities with longer maturities tend to produce higher yields, the price of longer maturity securities is also subject to greater fluctuations as a result of changes in interest rates. ● It is important to note that the Funds are not guaranteed by the U.S. government. ● There are no assurances that any Guggenheim fund will achieve its objective and/or strategy. These Funds are subject to active trading and tracking error risks, which may increase volatility, impact the Fund’s ability to achieve its investment objective, and may decrease the Fund’s performance. ● For more on these and other risks, please read the prospectus.
The High Yield Strategy Fund and Inverse High Yield Strategy Fund may not be suitable for all investors. ● The Fund’s use of derivatives such as futures, options, and swap agreements will expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● A highly liquid secondary market may not exist for the credit default swaps the Fund invests in, and there can be no assurance that a highly liquid secondary market will develop. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. ● You may have a gain or loss when you sell your shares. ● In general, bond prices rise when interest rates fall, and vice versa. ● The Fund’s exposure to the high yield bond market may subject the Fund to greater volatility because (i) it will be affected by the ability of high yield security issuers’ ability to make principal and interest payments and (ii) the prices of derivatives linked to high yield bonds may fluctuate unpredictably and not necessarily in relation to interest rates. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● The Fund is subject to active trading risks that may increase volatility and impact its ability to achieve its investment objective. ● For more on these and other risks, please read the prospectus.
Monthly leveraged funds are not suitable for all investors. ● These funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking monthly leveraged investment results, and (c) intend to actively monitor and manage their investments. ● The more a fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The funds’ use of derivatives, such as futures, options, and swap agreements, may expose the funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Monthly leveraged funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a monthly basis. Because monthly leveraged funds seek to track the performance of their benchmark on a monthly basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the quarterly, annual or other period performance of its benchmark. Due to the compounding of monthly returns, leveraged funds’ returns over periods other than one calendar month will likely differ in amount and possibly direction from the benchmark return for the same period. For those funds that consistently apply leverage, the value of the funds’ shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. Monthly leveraged funds rebalance their portfolios on a monthly basis on the last day of each calendar month, increasing exposure in response to that month’s gains or reducing exposure in response to that month’s losses. ● Throughout the month, the amount of leverage that a monthly leveraged fund provides is allowed to float. Purchasing monthly leveraged funds on any day other than the last day of each calendar month will likely mean that the monthly leveraged fund’s actual leverage is different from its monthly leverage target. Investors should monitor their monthly leveraged funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the monthly leveraged funds’ prospectus.
The U.S. Government Money Market Fund may not be suitable for all investors. ● You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. ● For more on these and other risks, please read the prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2020 |
The 12-month period ended March 31, 2020, was a wild ride for markets. While the U.S. economy was generally in good shape in 2019, recessionary fears rose throughout the year, prompting the U.S. Federal Reserve (the “Fed”) to announce a rate cut on July 31, the first since 2008, amid growing downside risks to policymakers’ baseline growth and inflation forecasts. Key among those risks were slowing global growth, the threat of additional U.S.-China tariffs, and the possible ramifications surrounding Brexit. The Fed subsequently cut rates twice more in 2019, which caused markets to rally toward the end of the year and into early 2020. Stocks reached new highs and credit spreads tightened to historic levels. Since then, the global outbreak of the coronavirus, COVID-19, has been at the center of everything. As of this writing, COVID-19 has spread to 210 countries, resulted in over 2.5 million cases, and caused over 170,000 deaths. Thus far, the U.S. makes up more than 30% of global cases, and 25% of global deaths. States have required the labor force to work from home if possible, individuals to practice social distancing, and non-essential businesses to shut down.
Closures, quarantines, and social distancing efforts have impacted the travel, hospitality, restaurants, and retail industries, with activity down 100% in some areas of the country. Further exacerbating the decline in output will be reduced business investment, which was already stalling due to falling profits, trade conflicts, and political uncertainty. The coronavirus shock and collapse in oil prices will likely further depress capital expenditures.
In response to the crisis, the Federal Open Market Committee cut rates by a further 125 basis points in the first quarter of 2020 and passed a series of stimulus programs. Among these were the Primary and Secondary Market Corporate Credit Facilities, which are lending programs primarily targeting investment-grade corporate bond issuers, implemented in concert with the U.S. Treasury. It was only after the announcement of this program that corporate credit found some relief from the selloff, but we expect this relief may be temporary.
With an alphabet soup of monetary programs targeting relief from the coronavirus impact, fiscal policy has also stepped up to the plate with a spending bill worth over $2 trillion that aims to assist consumers, states, small businesses, and certain industries. There is no question that these programs will help ease the economic fallout from virus containment measures, but even $2 trillion may be too small given the magnitude of the economic shock that we are facing. Additionally, it is far from clear that fiscal measures are an adequate solution to the issue at hand: the physical impediment to consumer spending. Fiscal and monetary policy can do their part, but ultimately it is public health policy that will likely be the greatest determinant of the economic outlook.
For the 12 months ended March 31, 2020, the Standard & Poor’s 500® (“S&P 500”) Index* returned -6.98%. The decline, while significant, represents something of a recovery in stocks. The S&P 500 peaked at 3,386.15 on February 19, 2020, before plummeting 33.9% to a low of 2,237.40 on March 23, 2020, then recovering some lost ground by the end of the month.
The consensus estimate for S&P 500 earnings per share in 2020 is still around $150. Our research shows S&P 500 earnings per share could fall below $100. Similarly, economists have no way to calibrate how bad the economic data could be based on history. The March U.S. non-farm payrolls report was evidence of this, as it showed a decline in payrolls of 700,000 jobs versus survey expectations of a decline of only 100,000 jobs. We currently expect that second quarter U.S. real gross domestic product (“GDP”) quarter-over-quarter growth could fall by 40% annualized and the unemployment rate could rise to at least 20%. Beyond that, the severity of the crisis depends on containment of the virus and the effectiveness of social distancing measures put in place, but expectations for a quick and sustained V-shaped recovery appear overly optimistic.
For the 12 months ended March 31, 2020, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.92%. The return of the MSCI Emerging Markets Index* was -17.36%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted an 8.93% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -6.94%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.25% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
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ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2020 |
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Long Treasury Index includes all publicly issued, U.S. Treasury securities that have a remaining maturity of 10 or more years, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and nonconvertible. The U.S. Long Treasury Index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
Dow Jones Industrial Average® is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
NASDAQ-100® Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P MidCap 400® Index provides investors with a benchmark for mid-sized companies. The index covers approximately 7% of the U.S. equity market, and seeks to remain an accurate measure of mid-sized companies, reflecting the risk and return characteristics of the broader mid-cap universe on an on-going basis.
| | THE RYDEX FUNDS ANNUAL REPORT | 5 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) | |
Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in-line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period on a cumulative basis. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods.
An Example of Compounding
For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6.0% gain and an expectation that the fund will rise by 9.0%. On the same day, the fund’s net asset value per share (“NAV”) increases from $10.00 to $10.90 for a gain of 9.0% — in line with its benchmark.
On day two, assume the index falls from 106 to 99 for a loss of about 6.6%. The fund, as expected, falls 9.9% to a price of $9.82. On each day, the fund performed exactly in line with its benchmark, but for the two-day period, the fund was down 1.8%, while the index was down only 1.0%. Without taking into account the daily compounding of returns, one would expect the fund to lose 1.5% and would see the fund as trailing by 0.3% when in fact it had performed perfectly. This example is summarized in the table below.
| Index
Level | Index
Performance | Fund
Expectation | Fund
NAV | Fund
Performance | Assessment |
Start | 100 | | | $10.00 | | |
Day 1 | 106 | 6.0% | 9.0% | $10.90 | 9.0% | In line |
Day 2 | 99 | -6.6% | -9.9% | $ 9.82 | -9.9% | In line |
Cumulative | | -1.0% | -1.5% | | -1.8% | -0.3% |
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
6 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) | |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning September 30, 2019 and ending March 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 1. Based on actual Fund return3 | | | | | |
Nova Fund | | | | | |
Investor Class | 1.37% | (22.85%) | $ 1,000.00 | $ 771.50 | $ 6.07 |
A-Class | 1.62% | (22.94%) | 1,000.00 | 770.60 | 7.17 |
C-Class | 2.37% | (23.24%) | 1,000.00 | 767.60 | 10.47 |
H-Class | 1.62% | (22.95%) | 1,000.00 | 770.50 | 7.17 |
S&P 500® Fund | | | | | |
A-Class | 1.69% | (13.15%) | 1,000.00 | 868.50 | 7.89 |
C-Class | 2.43% | (13.47%) | 1,000.00 | 865.30 | 11.33 |
H-Class | 1.69% | (13.14%) | 1,000.00 | 868.60 | 7.89 |
Inverse S&P 500® Strategy Fund | | | | | |
Investor Class | 1.52% | 6.26% | 1,000.00 | 1,062.60 | 7.84 |
A-Class | 1.77% | 6.14% | 1,000.00 | 1,061.40 | 9.12 |
C-Class | 2.52% | 5.72% | 1,000.00 | 1,057.20 | 12.96 |
H-Class | 1.78% | 6.14% | 1,000.00 | 1,061.40 | 9.17 |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | | |
A-Class | 1.32% | (1.54%) | 1,000.00 | 984.60 | 6.55 |
C-Class | 2.06% | (1.91%) | 1,000.00 | 980.90 | 10.20 |
H-Class | 1.33% | (1.55%) | 1,000.00 | 984.50 | 6.60 |
Inverse NASDAQ-100® Strategy Fund | | | | | |
Investor Class | 1.56% | (7.92%) | 1,000.00 | 920.80 | 7.49 |
A-Class | 1.78% | (8.03%) | 1,000.00 | 919.70 | 8.54 |
C-Class | 2.54% | (8.39%) | 1,000.00 | 916.10 | 12.17 |
H-Class | 1.80% | (8.05%) | 1,000.00 | 919.50 | 8.64 |
Mid-Cap 1.5x Strategy Fund | | | | | |
A-Class | 1.73% | (38.91%) | 1,000.00 | 610.90 | 6.97 |
C-Class | 2.48% | (39.14%) | 1,000.00 | 608.60 | 9.97 |
H-Class | 1.78% | (38.91%) | 1,000.00 | 610.90 | 7.17 |
Inverse Mid-Cap Strategy Fund | | | | | |
A-Class | 1.70% | 21.01% | 1,000.00 | 1,210.10 | 9.39 |
C-Class | 2.63% | 20.83% | 1,000.00 | 1,208.30 | 14.52 |
H-Class | 1.71% | 21.05% | 1,000.00 | 1,210.50 | 9.45 |
Russell 2000® 1.5x Strategy Fund | | | | | |
A-Class | 1.77% | (36.94%) | 1,000.00 | 630.60 | 7.22 |
C-Class | 2.51% | (37.19%) | 1,000.00 | 628.10 | 10.22 |
H-Class | 1.82% | (36.94%) | 1,000.00 | 630.60 | 7.42 |
Russell 2000® Fund | | | | | |
A-Class | 1.73% | (24.46%) | 1,000.00 | 755.40 | 7.59 |
C-Class | 2.48% | (24.74%) | 1,000.00 | 752.60 | 10.87 |
H-Class | 1.74% | (24.45%) | 1,000.00 | 755.50 | 7.64 |
Inverse Russell 2000® Strategy Fund | | | | | |
A-Class | 1.79% | 18.65% | 1,000.00 | 1,186.50 | 9.78 |
C-Class | 2.54% | 18.29% | 1,000.00 | 1,182.90 | 13.86 |
H-Class | 1.80% | 18.73% | 1,000.00 | 1,187.30 | 9.84 |
8 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Dow Jones Industrial Average® Fund | | | | | |
A-Class | 1.67% | (18.79%) | $ 1,000.00 | $ 812.10 | $ 7.57 |
C-Class | 2.42% | (19.11%) | 1,000.00 | 808.90 | 10.94 |
H-Class | 1.67% | (18.81%) | 1,000.00 | 811.90 | 7.56 |
Government Long Bond 1.2x Strategy Fund | | | | | |
Investor Class | 1.06% | 22.51% | 1,000.00 | 1,225.10 | 5.90 |
A-Class | 1.31% | 22.35% | 1,000.00 | 1,223.50 | 7.28 |
C-Class | 2.06% | 21.90% | 1,000.00 | 1,219.00 | 11.43 |
H-Class | 1.31% | 22.36% | 1,000.00 | 1,223.60 | 7.28 |
Inverse Government Long Bond Strategy Fund | | | | |
Investor Class | 2.93% | (19.80%) | 1,000.00 | 802.00 | 13.20 |
A-Class | 3.17% | (19.91%) | 1,000.00 | 800.90 | 14.27 |
C-Class | 3.91% | (20.19%) | 1,000.00 | 798.10 | 17.58 |
H-Class | 3.21% | (19.93%) | 1,000.00 | 800.70 | 14.45 |
High Yield Strategy Fund | | | | | |
A-Class | 1.62% | (9.91%) | 1,000.00 | 900.90 | 7.70 |
C-Class | 2.37% | (10.27%) | 1,000.00 | 897.30 | 11.24 |
H-Class | 1.62% | (9.92%) | 1,000.00 | 900.80 | 7.70 |
Inverse High Yield Strategy Fund | | | | | |
A-Class | 1.61% | 6.69% | 1,000.00 | 1,066.90 | 8.32 |
C-Class | 2.34% | 6.31% | 1,000.00 | 1,063.10 | 12.07 |
H-Class | 1.64% | 6.84% | 1,000.00 | 1,068.40 | 8.48 |
U.S. Government Money Market Fund | | | | | |
Money Market Class | 1.01% | 0.32% | 1,000.00 | 1,003.20 | 5.06 |
| | THE RYDEX FUNDS ANNUAL REPORT | 9 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 2. Based on hypothetical 5% return (before expenses) | | | | |
Nova Fund | | | | | |
Investor Class | 1.37% | 5.00% | $ 1,000.00 | $ 1,018.15 | $ 6.91 |
A-Class | 1.62% | 5.00% | 1,000.00 | 1,016.90 | 8.17 |
C-Class | 2.37% | 5.00% | 1,000.00 | 1,013.15 | 11.93 |
H-Class | 1.62% | 5.00% | 1,000.00 | 1,016.90 | 8.17 |
S&P 500® Fund | | | | | |
A-Class | 1.69% | 5.00% | 1,000.00 | 1,016.55 | 8.52 |
C-Class | 2.43% | 5.00% | 1,000.00 | 1,012.85 | 12.23 |
H-Class | 1.69% | 5.00% | 1,000.00 | 1,016.55 | 8.52 |
Inverse S&P 500® Strategy Fund | | | | | |
Investor Class | 1.52% | 5.00% | 1,000.00 | 1,017.40 | 7.67 |
A-Class | 1.77% | 5.00% | 1,000.00 | 1,016.15 | 8.92 |
C-Class | 2.52% | 5.00% | 1,000.00 | 1,012.40 | 12.68 |
H-Class | 1.78% | 5.00% | 1,000.00 | 1,016.10 | 8.97 |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | | |
A-Class | 1.32% | 5.00% | 1,000.00 | 1,018.40 | 6.66 |
C-Class | 2.06% | 5.00% | 1,000.00 | 1,014.70 | 10.38 |
H-Class | 1.33% | 5.00% | 1,000.00 | 1,018.35 | 6.71 |
Inverse NASDAQ-100® Strategy Fund | | | | | |
Investor Class | 1.56% | 5.00% | 1,000.00 | 1,017.20 | 7.87 |
A-Class | 1.78% | 5.00% | 1,000.00 | 1,016.10 | 8.97 |
C-Class | 2.54% | 5.00% | 1,000.00 | 1,012.30 | 12.78 |
H-Class | 1.80% | 5.00% | 1,000.00 | 1,016.00 | 9.07 |
Mid-Cap 1.5x Strategy Fund | | | | | |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.78% | 5.00% | 1,000.00 | 1,016.10 | 8.97 |
Inverse Mid-Cap Strategy Fund | | | | | |
A-Class | 1.70% | 5.00% | 1,000.00 | 1,016.50 | 8.57 |
C-Class | 2.63% | 5.00% | 1,000.00 | 1,011.85 | 13.23 |
H-Class | 1.71% | 5.00% | 1,000.00 | 1,016.45 | 8.62 |
Russell 2000® 1.5x Strategy Fund | | | | | |
A-Class | 1.77% | 5.00% | 1,000.00 | 1,016.15 | 8.92 |
C-Class | 2.51% | 5.00% | 1,000.00 | 1,012.45 | 12.63 |
H-Class | 1.82% | 5.00% | 1,000.00 | 1,015.90 | 9.17 |
Russell 2000® Fund | | | | | |
A-Class | 1.73% | 5.00% | 1,000.00 | 1,016.35 | 8.72 |
C-Class | 2.48% | 5.00% | 1,000.00 | 1,012.60 | 12.48 |
H-Class | 1.74% | 5.00% | 1,000.00 | 1,016.30 | 8.77 |
Inverse Russell 2000® Strategy Fund | | | | | |
A-Class | 1.79% | 5.00% | 1,000.00 | 1,016.05 | 9.02 |
C-Class | 2.54% | 5.00% | 1,000.00 | 1,012.30 | 12.78 |
H-Class | 1.80% | 5.00% | 1,000.00 | 1,016.00 | 9.07 |
10 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Dow Jones Industrial Average® Fund | | | | | |
A-Class | 1.67% | 5.00% | $ 1,000.00 | $ 1,016.65 | $ 8.42 |
C-Class | 2.42% | 5.00% | 1,000.00 | 1,012.90 | 12.18 |
H-Class | 1.67% | 5.00% | 1,000.00 | 1,016.65 | 8.42 |
Government Long Bond 1.2x Strategy Fund | | | | | |
Investor Class | 1.06% | 5.00% | 1,000.00 | 1,019.70 | 5.35 |
A-Class | 1.31% | 5.00% | 1,000.00 | 1,018.45 | 6.61 |
C-Class | 2.06% | 5.00% | 1,000.00 | 1,014.70 | 10.38 |
H-Class | 1.31% | 5.00% | 1,000.00 | 1,018.45 | 6.61 |
Inverse Government Long Bond Strategy Fund | | | | |
Investor Class | 2.93% | 5.00% | 1,000.00 | 1,010.35 | 14.73 |
A-Class | 3.17% | 5.00% | 1,000.00 | 1,009.15 | 15.92 |
C-Class | 3.91% | 5.00% | 1,000.00 | 1,005.45 | 19.60 |
H-Class | 3.21% | 5.00% | 1,000.00 | 1,008.95 | 16.12 |
High Yield Strategy Fund | | | | | |
A-Class | 1.62% | 5.00% | 1,000.00 | 1,016.90 | 8.17 |
C-Class | 2.37% | 5.00% | 1,000.00 | 1,013.15 | 11.93 |
H-Class | 1.62% | 5.00% | 1,000.00 | 1,016.90 | 8.17 |
Inverse High Yield Strategy Fund | | | | | |
A-Class | 1.61% | 5.00% | 1,000.00 | 1,016.95 | 8.12 |
C-Class | 2.34% | 5.00% | 1,000.00 | 1,013.30 | 11.78 |
H-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
U.S. Government Money Market Fund | | | | | |
Money Market Class | 1.01% | 5.00% | 1,000.00 | 1,019.95 | 5.10 |
1 | This ratio represents annualized Net Expense, which include interest expense related to securities sold short. Excluding short interest expense, the operating ratio of the Inverse Government Long Bond Strategy Fund would be 1.51%,1.76%, 2.51%, and 1.76% for Investor Class, A-Class, C-Class, and H-Class, respectively. Excludes expenses of the underlying funds in which the Funds invest, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
3 | Actual cumulative return at net asset value for the period September 30, 2019 to March 31, 2020. |
| | THE RYDEX FUNDS ANNUAL REPORT | 11 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
NOVA FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Nova Fund maintained a daily correlation of over 99% to its benchmark of 150% of the daily price movement of the S&P 500 Index.
Nova Fund Investor Class returned -17.19%, while the S&P 500 Index returned -6.98% over the same time period.
The only sector contributing to the return of the underlying index was Information Technology. The sectors detracting the most were Energy, Financials, and Industrials.
The holdings contributing the most to the return of the underlying index were Microsoft Corp., Apple, Inc., and Amazon.com, Inc. The holdings detracting the most were ExxonMobil Corp., Boeing Co., and Chevron Corp.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles had a negligible impact on Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
12 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
Investor Class | July 12, 1993 |
A-Class | March 31, 2004 |
C-Class | March 14, 2001 |
H-Class | September 18, 2014 |
Cumulative Fund Performance*
Ten Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund II | 21.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 14.7% |
Guggenheim Strategy Fund III | 3.2% |
Microsoft Corp. | 0.0%* |
Apple, Inc. | 0.0%* |
Amazon.com, Inc. | 0.0%* |
Facebook, Inc. — Class A | 0.0%* |
Berkshire Hathaway, Inc. — Class B | 0.0%* |
Johnson & Johnson | 0.0%* |
Alphabet, Inc. — Class C | 0.0%* |
Top Ten Total | 39.3% |
* | Security is less than 0.1%. |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (17.19%) | 5.89% | 12.52% |
A-Class Shares | (17.38%) | 5.64% | 12.25% |
A-Class Shares with sales charge‡ | (21.30%) | 4.62% | 11.71% |
C-Class Shares | (18.02%) | 4.86% | 11.42% |
C-Class Shares with CDSC§ | (18.84%) | 4.86% | 11.42% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
| 1 Year | 5 Year | Since
Inception
(09/18/14) |
H-Class Shares | (17.39%) | 5.66% | 5.96% |
S&P 500 Index | (6.98%) | 6.73% | 6.80% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
NOVA FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 0.4% |
| | | | | | | | | |
Consumer, Non-cyclical - 0.1% |
Johnson & Johnson | | | 28 | | | $ | 3,672 | |
Procter & Gamble Co. | | | 27 | | | | 2,970 | |
UnitedHealth Group, Inc. | | | 10 | | | | 2,494 | |
Merck & Company, Inc. | | | 27 | | | | 2,077 | |
Pfizer, Inc. | | | 59 | | | | 1,926 | |
Coca-Cola Co. | | | 41 | | | | 1,814 | |
PepsiCo, Inc. | | | 15 | | | | 1,802 | |
Abbott Laboratories | | | 19 | | | | 1,499 | |
Bristol-Myers Squibb Co. | | | 25 | | | | 1,394 | |
Medtronic plc | | | 14 | | | | 1,263 | |
Eli Lilly & Co. | | | 9 | | | | 1,248 | |
PayPal Holdings, Inc.* | | | 13 | | | | 1,245 | |
Philip Morris International, Inc. | | | 17 | | | | 1,240 | |
AbbVie, Inc. | | | 16 | | | | 1,219 | |
Amgen, Inc. | | | 6 | | | | 1,216 | |
Thermo Fisher Scientific, Inc. | | | 4 | | | | 1,134 | |
Gilead Sciences, Inc. | | | 14 | | | | 1,047 | |
Danaher Corp. | | | 7 | | | | 969 | |
CVS Health Corp. | | | 14 | | | | 831 | |
Altria Group, Inc. | | | 20 | | | | 774 | |
Mondelez International, Inc. — Class A | | | 15 | | | | 751 | |
S&P Global, Inc. | | | 3 | | | | 735 | |
Vertex Pharmaceuticals, Inc.* | | | 3 | | | | 714 | |
Cigna Corp. | | | 4 | | | | 709 | |
Allergan plc | | | 4 | | | | 708 | |
Becton Dickinson and Co. | | | 3 | | | | 689 | |
Automatic Data Processing, Inc. | | | 5 | | | | 683 | |
Anthem, Inc. | | | 3 | | | | 681 | |
Biogen, Inc.* | | | 2 | | | | 633 | |
Colgate-Palmolive Co. | | | 9 | | | | 597 | |
Zoetis, Inc. | | | 5 | | | | 588 | |
Illumina, Inc.* | | | 2 | | | | 546 | |
Kimberly-Clark Corp. | | | 4 | | | | 511 | |
Stryker Corp. | | | 3 | | | | 500 | |
Intuitive Surgical, Inc.* | | | 1 | | | | 495 | |
Boston Scientific Corp.* | | | 15 | | | | 489 | |
Regeneron Pharmaceuticals, Inc.* | | | 1 | | | | 488 | |
Global Payments, Inc. | | | 3 | | | | 433 | |
Moody’s Corp. | | | 2 | | | | 423 | |
Baxter International, Inc. | | | 5 | | | | 406 | |
Edwards Lifesciences Corp.* | | | 2 | | | | 377 | |
Centene Corp.* | | | 6 | | | | 357 | |
Estee Lauder Companies, Inc. — Class A | | | 2 | | | | 319 | |
General Mills, Inc. | | | 6 | | | | 317 | |
Humana, Inc. | | | 1 | | | | 314 | |
ResMed, Inc. | | | 2 | | | | 295 | |
Constellation Brands, Inc. — Class A | | | 2 | | | | 287 | |
Verisk Analytics, Inc. — Class A | | | 2 | | | | 279 | |
Cooper Companies, Inc. | | | 1 | | | | 276 | |
Kroger Co. | | | 9 | | | | 271 | |
McKesson Corp. | | | 2 | | | | 271 | |
HCA Healthcare, Inc. | | | 3 | | | | 270 | |
Hershey Co. | | | 2 | | | | 265 | |
IDEXX Laboratories, Inc.* | | | 1 | | | | 242 | |
IHS Markit Ltd. | | | 4 | | | | 240 | |
Sysco Corp. | | | 5 | | | | 228 | |
Monster Beverage Corp.* | | | 4 | | | | 225 | |
IQVIA Holdings, Inc.* | | | 2 | | | | 216 | |
Archer-Daniels-Midland Co. | | | 6 | | | | 211 | |
Zimmer Biomet Holdings, Inc. | | | 2 | | | | 202 | |
Church & Dwight Company, Inc. | | | 3 | | | | 193 | |
Corteva, Inc. | | | 8 | | | | 188 | |
FleetCor Technologies, Inc.* | | | 1 | | | | 187 | |
Kellogg Co. | | | 3 | | | | 180 | |
Alexion Pharmaceuticals, Inc.* | | | 2 | | | | 180 | |
AmerisourceBergen Corp. — Class A | | | 2 | | | | 177 | |
Align Technology, Inc.* | | | 1 | | | | 174 | |
Tyson Foods, Inc. — Class A | | | 3 | | | | 174 | |
Clorox Co. | | | 1 | | | | 173 | |
Cintas Corp. | | | 1 | | | | 173 | |
Kraft Heinz Co. | | | 7 | | | | 173 | |
Conagra Brands, Inc. | | | 5 | | | | 147 | |
Incyte Corp.* | | | 2 | | | | 146 | |
Cardinal Health, Inc. | | | 3 | | | | 144 | |
McCormick & Company, Inc. | | | 1 | | | | 141 | |
STERIS plc | | | 1 | | | | 140 | |
Hormel Foods Corp. | | | 3 | | | | 140 | |
Laboratory Corporation of America Holdings* | | | 1 | | | | 126 | |
Equifax, Inc. | | | 1 | | | | 119 | |
Lamb Weston Holdings, Inc. | | | 2 | | | | 114 | |
Brown-Forman Corp. — Class B | | | 2 | | | | 111 | |
JM Smucker Co. | | | 1 | | | | 111 | |
Hologic, Inc.* | | | 3 | | | | 105 | |
United Rentals, Inc.* | | | 1 | | | | 103 | |
Varian Medical Systems, Inc.* | | | 1 | | | | 103 | |
Avery Dennison Corp. | | | 1 | | | | 102 | |
Henry Schein, Inc.* | | | 2 | | | | 101 | |
Gartner, Inc.* | | | 1 | | | | 100 | |
Universal Health Services, Inc. — Class B | | | 1 | | | | 99 | |
Campbell Soup Co. | | | 2 | | | | 92 | |
Mylan N.V.* | | | 6 | | | | 89 | |
Quest Diagnostics, Inc. | | | 1 | | | | 80 | |
Molson Coors Beverage Co. — Class B | | | 2 | | | | 78 | |
Dentsply Sirona, Inc. | | | 2 | | | | 78 | |
DaVita, Inc.* | | | 1 | | | | 76 | |
Rollins, Inc. | | | 2 | | | | 72 | |
Quanta Services, Inc. | | | 2 | | | | 63 | |
Nielsen Holdings plc | | | 4 | | | | 50 | |
Perrigo Company plc | | | 1 | | | | 48 | |
Robert Half International, Inc. | | | 1 | | | | 38 | |
H&R Block, Inc. | | | 2 | | | | 28 | |
Coty, Inc. — Class A | | | 3 | | | | 15 | |
Total Consumer, Non-cyclical | | | | | | | 54,006 | |
| | | | | | | | | |
Technology - 0.1% |
Microsoft Corp. | | | 83 | | | | 13,090 | |
Apple, Inc. | | | 45 | | | | 11,443 | |
Intel Corp. | | | 47 | | | | 2,544 | |
NVIDIA Corp. | | | 7 | | | | 1,845 | |
Adobe, Inc.* | | | 5 | | | | 1,591 | |
salesforce.com, Inc.* | | | 10 | | | | 1,440 | |
Accenture plc — Class A | | | 7 | | | | 1,143 | |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
NOVA FUND | |
| | Shares | | | Value | |
Oracle Corp. | | | 23 | | | $ | 1,112 | |
International Business Machines Corp. | | | 10 | | | | 1,109 | |
Texas Instruments, Inc. | | | 10 | | | | 999 | |
Broadcom, Inc. | | | 4 | | | | 948 | |
Fidelity National Information Services, Inc. | | | 7 | | | | 851 | |
QUALCOMM, Inc. | | | 12 | | | | 812 | |
Intuit, Inc. | | | 3 | | | | 690 | |
Advanced Micro Devices, Inc.* | | | 13 | | | | 591 | |
ServiceNow, Inc.* | | | 2 | | | | 573 | |
Fiserv, Inc.* | | | 6 | | | | 570 | |
Micron Technology, Inc.* | | | 12 | | | | 505 | |
Lam Research Corp. | | | 2 | | | | 480 | |
Activision Blizzard, Inc. | | | 8 | | | | 476 | |
Applied Materials, Inc. | | | 10 | | | | 458 | |
Analog Devices, Inc. | | | 4 | | | | 359 | |
Autodesk, Inc.* | | | 2 | | | | 312 | |
Electronic Arts, Inc.* | | | 3 | | | | 300 | |
MSCI, Inc. — Class A | | | 1 | | | | 289 | |
KLA Corp. | | | 2 | | | | 287 | |
Cognizant Technology Solutions Corp. — Class A | | | 6 | | | | 279 | |
HP, Inc. | | | 16 | | | | 278 | |
Synopsys, Inc.* | | | 2 | | | | 258 | |
Xilinx, Inc. | | | 3 | | | | 234 | |
ANSYS, Inc.* | | | 1 | | | | 232 | |
Microchip Technology, Inc. | | | 3 | | | | 203 | |
Fortinet, Inc.* | | | 2 | | | | 202 | |
Paycom Software, Inc.* | | | 1 | | | | 202 | |
Cadence Design Systems, Inc.* | | | 3 | | | | 198 | |
Cerner Corp. | | | 3 | | | | 189 | |
Paychex, Inc. | | | 3 | | | | 189 | |
Zebra Technologies Corp. — Class A* | | | 1 | | | | 183 | |
Akamai Technologies, Inc.* | | | 2 | | | | 183 | |
Skyworks Solutions, Inc. | | | 2 | | | | 179 | |
Jack Henry & Associates, Inc. | | | 1 | | | | 155 | |
Maxim Integrated Products, Inc. | | | 3 | | | | 146 | |
Citrix Systems, Inc. | | | 1 | | | | 142 | |
Hewlett Packard Enterprise Co. | | | 14 | | | | 136 | |
Western Digital Corp. | | | 3 | | | | 125 | |
Take-Two Interactive Software, Inc.* | | | 1 | | | | 119 | |
Seagate Technology plc | | | 2 | | | | 98 | |
Broadridge Financial Solutions, Inc. | | | 1 | | | | 95 | |
Leidos Holdings, Inc. | | | 1 | | | | 92 | |
NetApp, Inc. | | | 2 | | | | 83 | |
Qorvo, Inc.* | | | 1 | | | | 81 | |
DXC Technology Co. | | | 3 | | | | 39 | |
Xerox Holdings Corp. | | | 2 | | | | 38 | |
Total Technology | | | | | | | 49,175 | |
| | | | | | | | | |
Financial - 0.1% |
Berkshire Hathaway, Inc. — Class B* | | | 21 | | | | 3,839 | |
JPMorgan Chase & Co. | | | 34 | | | | 3,061 | |
Visa, Inc. — Class A | | | 18 | | | | 2,900 | |
Mastercard, Inc. — Class A | | | 10 | | | | 2,416 | |
Bank of America Corp. | | | 88 | | | | 1,868 | |
Wells Fargo & Co. | | | 41 | | | | 1,177 | |
American Tower Corp. — Class A REIT | | | 5 | | | | 1,089 | |
Citigroup, Inc. | | | 23 | | | | 969 | |
CME Group, Inc. — Class A | | | 4 | | | | 692 | |
Prologis, Inc. REIT | | | 8 | | | | 643 | |
Equinix, Inc. REIT | | | 1 | | | | 625 | |
American Express Co. | | | 7 | | | | 599 | |
Crown Castle International Corp. REIT | | | 4 | | | | 578 | |
Chubb Ltd. | | | 5 | | | | 558 | |
U.S. Bancorp | | | 15 | | | | 517 | |
Aon plc | | | 3 | | | | 495 | |
Intercontinental Exchange, Inc. | | | 6 | | | | 485 | |
PNC Financial Services Group, Inc. | | | 5 | | | | 479 | |
Goldman Sachs Group, Inc. | | | 3 | | | | 464 | |
Progressive Corp. | | | 6 | | | | 443 | |
Morgan Stanley | | | 13 | | | | 442 | |
BlackRock, Inc. — Class A | | | 1 | | | | 440 | |
Marsh & McLennan Companies, Inc. | | | 5 | | | | 432 | |
Truist Financial Corp. | | | 14 | | | | 432 | |
Digital Realty Trust, Inc. REIT | | | 3 | | | | 417 | |
Charles Schwab Corp. | | | 12 | | | | 403 | |
Public Storage REIT | | | 2 | | | | 397 | |
Bank of New York Mellon Corp. | | | 9 | | | | 303 | |
Travelers Companies, Inc. | | | 3 | | | | 298 | |
AvalonBay Communities, Inc. REIT | | | 2 | | | | 294 | |
T. Rowe Price Group, Inc. | | | 3 | | | | 293 | |
Allstate Corp. | | | 3 | | | | 275 | |
Aflac, Inc. | | | 8 | | | | 274 | |
SBA Communications Corp. REIT | | | 1 | | | | 270 | |
Capital One Financial Corp. | | | 5 | | | | 252 | |
Equity Residential REIT | | | 4 | | | | 247 | |
MetLife, Inc. | | | 8 | | | | 245 | |
Essex Property Trust, Inc. REIT | | | 1 | | | | 220 | |
American International Group, Inc. | | | 9 | | | | 218 | |
State Street Corp. | | | 4 | | | | 213 | |
Prudential Financial, Inc. | | | 4 | | | | 209 | |
Realty Income Corp. REIT | | | 4 | | | | 199 | |
Boston Properties, Inc. REIT | | | 2 | | | | 184 | |
Welltower, Inc. REIT | | | 4 | | | | 183 | |
Willis Towers Watson plc | | | 1 | | | | 170 | |
Simon Property Group, Inc. REIT | | | 3 | | | | 165 | |
First Republic Bank | | | 2 | | | | 164 | |
Arthur J Gallagher & Co. | | | 2 | | | | 163 | |
SVB Financial Group* | | | 1 | | | | 151 | |
Northern Trust Corp. | | | 2 | | | | 151 | |
Cincinnati Financial Corp. | | | 2 | | | | 151 | |
CBRE Group, Inc. — Class A* | | | 4 | | | | 151 | |
Hartford Financial Services Group, Inc. | | | 4 | | | | 141 | |
Alexandria Real Estate Equities, Inc. REIT | | | 1 | | | | 137 | |
Weyerhaeuser Co. REIT | | | 8 | | | | 136 | |
Duke Realty Corp. REIT | | | 4 | | | | 130 | |
Healthpeak Properties, Inc. REIT | | | 5 | | | | 119 | |
Fifth Third Bancorp | | | 8 | | | | 119 | |
KeyCorp | | | 11 | | | | 114 | |
UDR, Inc. REIT | | | 3 | | | | 110 | |
Ventas, Inc. REIT | | | 4 | | | | 107 | |
Discover Financial Services | | | 3 | | | | 107 | |
Loews Corp. | | | 3 | | | | 105 | |
WR Berkley Corp. | | | 2 | | | | 104 | |
Assurant, Inc. | | | 1 | | | | 104 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
NOVA FUND | |
| | Shares | | | Value | |
M&T Bank Corp. | | | 1 | | | $ | 103 | |
Mid-America Apartment Communities, Inc. REIT | | | 1 | | | | 103 | |
Ameriprise Financial, Inc. | | | 1 | | | | 102 | |
Synchrony Financial | | | 6 | | | | 97 | |
Extra Space Storage, Inc. REIT | | | 1 | | | | 96 | |
Nasdaq, Inc. | | | 1 | | | | 95 | |
Citizens Financial Group, Inc. | | | 5 | | | | 94 | |
Principal Financial Group, Inc. | | | 3 | | | | 94 | |
Western Union Co. | | | 5 | | | | 91 | |
Huntington Bancshares, Inc. | | | 11 | | | | 90 | |
Regions Financial Corp. | | | 10 | | | | 90 | |
Cboe Global Markets, Inc. | | | 1 | | | | 89 | |
Host Hotels & Resorts, Inc. REIT | | | 8 | | | | 88 | |
Regency Centers Corp. REIT | | | 2 | | | | 77 | |
Federal Realty Investment Trust REIT | | | 1 | | | | 75 | |
Vornado Realty Trust REIT | | | 2 | | | | 72 | |
Globe Life, Inc. | | | 1 | | | | 72 | |
Iron Mountain, Inc. REIT | | | 3 | | | | 71 | |
Apartment Investment & Management Co. — Class A REIT | | | 2 | | | | 70 | |
E*TRADE Financial Corp. | | | 2 | | | | 69 | |
Raymond James Financial, Inc. | | | 1 | | | | 63 | |
Comerica, Inc. | | | 2 | | | | 59 | |
People’s United Financial, Inc. | | | 5 | | | | 55 | |
Zions Bancorp North America | | | 2 | | | | 53 | |
Lincoln National Corp. | | | 2 | | | | 53 | |
Franklin Resources, Inc. | | | 3 | | | | 50 | |
Kimco Realty Corp. REIT | | | 5 | | | | 48 | |
SL Green Realty Corp. REIT | | | 1 | | | | 43 | |
Invesco Ltd. | | | 4 | | | | 36 | |
Unum Group | | | 2 | | | | 30 | |
Total Financial | | | | | | | 36,064 | |
| | | | | | | | | |
Communications - 0.1% |
Amazon.com, Inc.* | | | 4 | | | | 7,799 | |
Facebook, Inc. — Class A* | | | 26 | | | | 4,337 | |
Alphabet, Inc. — Class C* | | | 3 | | | | 3,488 | |
Alphabet, Inc. — Class A* | | | 3 | | | | 3,486 | |
Verizon Communications, Inc. | | | 44 | | | | 2,364 | |
AT&T, Inc. | | | 79 | | | | 2,303 | |
Netflix, Inc.* | | | 5 | | | | 1,877 | |
Walt Disney Co. | | | 19 | | | | 1,835 | |
Cisco Systems, Inc. | | | 46 | | | | 1,808 | |
Comcast Corp. — Class A | | | 49 | | | | 1,685 | |
Charter Communications, Inc. — Class A* | | | 2 | | | | 873 | |
Motorola Solutions, Inc. | | | 2 | | | | 266 | |
T-Mobile US, Inc.* | | | 3 | | | | 252 | |
eBay, Inc. | | | 8 | | | | 240 | |
Arista Networks, Inc.* | | | 1 | | | | 202 | |
Twitter, Inc.* | | | 8 | | | | 196 | |
CDW Corp. | | | 2 | | | | 187 | |
VeriSign, Inc.* | | | 1 | | | | 180 | |
Corning, Inc. | | | 8 | | | | 164 | |
Expedia Group, Inc. | | | 2 | | | | 113 | |
NortonLifeLock, Inc. | | | 6 | | | | 112 | |
Omnicom Group, Inc. | | | 2 | | | | 110 | |
F5 Networks, Inc.* | | | 1 | | | | 107 | |
CenturyLink, Inc. | | | 11 | | | | 104 | |
Fox Corp. — Class A | | | 4 | | | | 94 | |
ViacomCBS, Inc. — Class B | | | 6 | | | | 84 | |
Juniper Networks, Inc. | | | 4 | | | | 77 | |
Discovery, Inc. — Class C* | | | 4 | | | | 70 | |
Interpublic Group of Companies, Inc. | | | 4 | | | | 65 | |
DISH Network Corp. — Class A* | | | 3 | | | | 60 | |
Fox Corp. — Class B | | | 2 | | | | 46 | |
Discovery, Inc. — Class A* | | | 2 | | | | 39 | |
News Corp. — Class A | | | 4 | | | | 36 | |
News Corp. — Class B | | | 1 | | | | 9 | |
Total Communications | | | | | | | 34,668 | |
| | | | | | | | | |
Industrial - 0.0% |
Honeywell International, Inc. | | | 8 | | | | 1,070 | |
Lockheed Martin Corp. | | | 3 | | | | 1,017 | |
Union Pacific Corp. | | | 7 | | | | 987 | |
Boeing Co. | | | 6 | | | | 895 | |
United Technologies Corp. | | | 9 | | | | 849 | |
3M Co. | | | 6 | | | | 819 | |
General Electric Co. | | | 95 | | | | 754 | |
United Parcel Service, Inc. — Class B | | | 8 | | | | 747 | |
Caterpillar, Inc. | | | 6 | | | | 696 | |
Northrop Grumman Corp. | | | 2 | | | | 605 | |
CSX Corp. | | | 8 | | | | 459 | |
Norfolk Southern Corp. | | | 3 | | | | 438 | |
Illinois Tool Works, Inc. | | | 3 | | | | 426 | |
Deere & Co. | | | 3 | | | | 415 | |
General Dynamics Corp. | | | 3 | | | | 397 | |
Raytheon Co. | | | 3 | | | | 394 | |
Waste Management, Inc. | | | 4 | | | | 370 | |
FedEx Corp. | | | 3 | | | | 364 | |
L3Harris Technologies, Inc. | | | 2 | | | | 360 | |
Emerson Electric Co. | | | 7 | | | | 333 | |
TransDigm Group, Inc. | | | 1 | | | | 320 | |
Roper Technologies, Inc. | | | 1 | | | | 312 | |
Eaton Corporation plc | | | 4 | | | | 311 | |
Ball Corp. | | | 4 | | | | 259 | |
TE Connectivity Ltd. | | | 4 | | | | 252 | |
Trane Technologies plc | | | 3 | | | | 248 | |
Amphenol Corp. — Class A | | | 3 | | | | 219 | |
Johnson Controls International plc | | | 8 | | | | 216 | |
Agilent Technologies, Inc. | | | 3 | | | | 215 | |
Stanley Black & Decker, Inc. | | | 2 | | | | 200 | |
Old Dominion Freight Line, Inc. | | | 2 | | | | 197 | |
Martin Marietta Materials, Inc. | | | 1 | | | | 189 | |
Waters Corp.* | | | 1 | | | | 182 | |
Dover Corp. | | | 2 | | | | 168 | |
Keysight Technologies, Inc.* | | | 2 | | | | 167 | |
Fortive Corp. | | | 3 | | | | 166 | |
Rockwell Automation, Inc. | | | 1 | | | | 151 | |
Republic Services, Inc. — Class A | | | 2 | | | | 150 | |
Garmin Ltd. | | | 2 | | | | 150 | |
AMETEK, Inc. | | | 2 | | | | 144 | |
IDEX Corp. | | | 1 | | | | 138 | |
Amcor plc | | | 17 | | | | 138 | |
Expeditors International of Washington, Inc. | | | 2 | | | | 134 | |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
NOVA FUND | |
| | Shares | | | Value | |
Xylem, Inc. | | | 2 | | | $ | 130 | |
Parker-Hannifin Corp. | | | 1 | | | | 130 | |
Kansas City Southern | | | 1 | | | | 127 | |
Snap-on, Inc. | | | 1 | | | | 109 | |
Vulcan Materials Co. | | | 1 | | | | 108 | |
Masco Corp. | | | 3 | | | | 104 | |
Ingersoll Rand, Inc.* | | | 4 | | | | 99 | |
Westinghouse Air Brake Technologies Corp. | | | 2 | | | | 96 | |
J.B. Hunt Transport Services, Inc. | | | 1 | | | | 92 | |
Allegion plc | | | 1 | | | | 92 | |
Packaging Corporation of America | | | 1 | | | | 87 | |
Westrock Co. | | | 3 | | | | 85 | |
Jacobs Engineering Group, Inc. | | | 1 | | | | 79 | |
PerkinElmer, Inc. | | | 1 | | | | 75 | |
CH Robinson Worldwide, Inc. | | | 1 | | | | 66 | |
Arconic, Inc. | | | 4 | | | | 64 | |
Pentair plc | | | 2 | | | | 60 | |
Textron, Inc. | | | 2 | | | | 53 | |
Sealed Air Corp. | | | 2 | | | | 49 | |
Fortune Brands Home & Security, Inc. | | | 1 | | | | 43 | |
AO Smith Corp. | | | 1 | | | | 38 | |
FLIR Systems, Inc. | | | 1 | | | | 32 | |
Flowserve Corp. | | | 1 | | | | 24 | |
Total Industrial | | | | | | | 18,863 | |
| | | | | | | | | |
Consumer, Cyclical - 0.0% |
Home Depot, Inc. | | | 12 | | | | 2,240 | |
Walmart, Inc. | | | 15 | | | | 1,704 | |
Costco Wholesale Corp. | | | 5 | | | �� | 1,426 | |
McDonald’s Corp. | | | 8 | | | | 1,323 | |
NIKE, Inc. — Class B | | | 13 | | | | 1,076 | |
Starbucks Corp. | | | 13 | | | | 855 | |
Lowe’s Companies, Inc. | | | 8 | | | | 688 | |
TJX Companies, Inc. | | | 13 | | | | 622 | |
Target Corp. | | | 5 | | | | 465 | |
Dollar General Corp. | | | 3 | | | | 453 | |
Walgreens Boots Alliance, Inc. | | | 8 | | | | 366 | |
Ross Stores, Inc. | | | 4 | | | | 348 | |
O’Reilly Automotive, Inc.* | | | 1 | | | | 301 | |
General Motors Co. | | | 14 | | | | 291 | |
Cummins, Inc. | | | 2 | | | | 271 | |
PACCAR, Inc. | | | 4 | | | | 244 | |
Marriott International, Inc. — Class A | | | 3 | | | | 224 | |
Dollar Tree, Inc.* | | | 3 | | | | 220 | |
VF Corp. | | | 4 | | | | 216 | |
Yum! Brands, Inc. | | | 3 | | | | 206 | |
Hilton Worldwide Holdings, Inc. | | | 3 | | | | 205 | |
Ford Motor Co. | | | 42 | | | | 203 | |
Fastenal Co. | | | 6 | | | | 187 | |
Southwest Airlines Co. | | | 5 | | | | 178 | |
Ulta Beauty, Inc.* | | | 1 | | | | 176 | |
Delta Air Lines, Inc. | | | 6 | | | | 171 | |
Las Vegas Sands Corp. | | | 4 | | | | 170 | |
Aptiv plc | | | 3 | | | | 147 | |
Copart, Inc.* | | | 2 | | | | 137 | |
DR Horton, Inc. | | | 4 | | | | 136 | |
Genuine Parts Co. | | | 2 | | | | 135 | |
Tiffany & Co. | | | 1 | | | | 129 | |
Lennar Corp. — Class A | | | 3 | | | | 115 | |
Best Buy Company, Inc. | | | 2 | | | | 114 | |
CarMax, Inc.* | | | 2 | | | | 108 | |
Advance Auto Parts, Inc. | | | 1 | | | | 93 | |
Live Nation Entertainment, Inc.* | | | 2 | | | | 91 | |
Whirlpool Corp. | | | 1 | | | | 86 | |
Tractor Supply Co. | | | 1 | | | | 85 | |
Mohawk Industries, Inc.* | | | 1 | | | | 76 | |
Hasbro, Inc. | | | 1 | | | | 71 | |
MGM Resorts International | | | 6 | | | | 71 | |
PulteGroup, Inc. | | | 3 | | | | 67 | |
Ralph Lauren Corp. — Class A | | | 1 | | | | 67 | |
Royal Caribbean Cruises Ltd. | | | 2 | | | | 64 | |
United Airlines Holdings, Inc.*,1 | | | 2 | | | | 63 | |
LKQ Corp.* | | | 3 | | | | 62 | |
Wynn Resorts Ltd. | | | 1 | | | | 60 | |
Darden Restaurants, Inc. | | | 1 | | | | 54 | |
Newell Brands, Inc. | | | 4 | | | | 53 | |
Carnival Corp. | | | 4 | | | | 53 | |
American Airlines Group, Inc.1 | | | 4 | | | | 49 | |
BorgWarner, Inc. | | | 2 | | | | 49 | |
Tapestry, Inc. | | | 3 | | | | 39 | |
Harley-Davidson, Inc. | | | 2 | | | | 38 | |
PVH Corp. | | | 1 | | | | 38 | |
Hanesbrands, Inc. | | | 4 | | | | 31 | |
Kohl’s Corp. | | | 2 | | | | 29 | |
Alaska Air Group, Inc. | | | 1 | | | | 29 | |
Leggett & Platt, Inc. | | | 1 | | | | 26 | |
L Brands, Inc. | | | 2 | | | | 23 | |
Norwegian Cruise Line Holdings Ltd.* | | | 2 | | | | 22 | |
Capri Holdings Ltd.* | | | 2 | | | | 22 | |
Under Armour, Inc. — Class A* | | | 2 | | | | 18 | |
Under Armour, Inc. — Class C* | | | 2 | | | | 16 | |
Nordstrom, Inc. | | | 1 | | | | 15 | |
Macy’s, Inc.1 | | | 3 | | | | 15 | |
Gap, Inc. | | | 2 | | | | 14 | |
Total Consumer, Cyclical | | | | | | | 17,439 | |
| | | | | | | | | |
Utilities - 0.0% |
NextEra Energy, Inc. | | | 5 | | | | 1,203 | |
Dominion Energy, Inc. | | | 9 | | | | 650 | |
Duke Energy Corp. | | | 8 | | | | 647 | |
Southern Co. | | | 11 | | | | 596 | |
American Electric Power Company, Inc. | | | 5 | | | | 400 | |
Exelon Corp. | | | 10 | | | | 368 | |
Xcel Energy, Inc. | | | 6 | | | | 362 | |
Sempra Energy | | | 3 | | | | 339 | |
Consolidated Edison, Inc. | | | 4 | | | | 312 | |
WEC Energy Group, Inc. | | | 3 | | | | 264 | |
FirstEnergy Corp. | | | 6 | | | | 240 | |
American Water Works Company, Inc. | | | 2 | | | | 239 | |
Eversource Energy | | | 3 | | | | 235 | |
Public Service Enterprise Group, Inc. | | | 5 | | | | 225 | |
Edison International | | | 4 | | | | 219 | |
Ameren Corp. | | | 3 | | | | 219 | |
PPL Corp. | | | 8 | | | | 197 | |
DTE Energy Co. | | | 2 | | | | 190 | |
Entergy Corp. | | | 2 | | | | 188 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
NOVA FUND | |
| | Shares | | | Value | |
CMS Energy Corp. | | | 3 | | | $ | 176 | |
Alliant Energy Corp. | | | 3 | | | | 145 | |
Evergy, Inc. | | | 2 | | | | 110 | |
NiSource, Inc. | | | 4 | | | | 100 | |
Atmos Energy Corp. | | | 1 | | | | 99 | |
AES Corp. | | | 7 | | | | 95 | |
NRG Energy, Inc. | | | 3 | | | | 82 | |
CenterPoint Energy, Inc. | | | 5 | | | | 77 | |
Pinnacle West Capital Corp. | | | 1 | | | | 76 | |
Total Utilities | | | | | | | 8,053 | |
| | | | | | | | | |
Energy - 0.0% |
Exxon Mobil Corp. | | | 45 | | | | 1,709 | |
Chevron Corp. | | | 20 | | | | 1,449 | |
ConocoPhillips | | | 12 | | | | 370 | |
Kinder Morgan, Inc. | | | 21 | | | | 292 | |
Phillips 66 | | | 5 | | | | 268 | |
EOG Resources, Inc. | | | 6 | | | | 215 | |
Schlumberger Ltd. | | | 15 | | | | 202 | |
Williams Companies, Inc. | | | 13 | | | | 184 | |
Valero Energy Corp. | | | 4 | | | | 181 | |
Marathon Petroleum Corp. | | | 7 | | | | 165 | |
Pioneer Natural Resources Co. | | | 2 | | | | 140 | |
Occidental Petroleum Corp. | | | 10 | | | | 116 | |
Hess Corp. | | | 3 | | | | 100 | |
ONEOK, Inc. | | | 4 | | | | 87 | |
Concho Resources, Inc. | | | 2 | | | | 86 | |
Baker Hughes Co. | | | 7 | | | | 74 | |
Cabot Oil & Gas Corp. — Class A | | | 4 | | | | 69 | |
Halliburton Co. | | | 9 | | | | 62 | |
Diamondback Energy, Inc. | | | 2 | | | | 52 | |
HollyFrontier Corp. | | | 2 | | | | 49 | |
National Oilwell Varco, Inc. | | | 4 | | | | 39 | |
TechnipFMC plc | | | 5 | | | | 34 | |
Noble Energy, Inc. | | | 5 | | | | 30 | |
Marathon Oil Corp. | | | 9 | | | | 30 | |
Devon Energy Corp. | | | 4 | | | | 28 | |
Apache Corp. | | | 4 | | | | 17 | |
Helmerich & Payne, Inc. | | | 1 | | | | 16 | |
Total Energy | | | | | | | 6,064 | |
| | | | | | | | | |
Basic Materials - 0.0% |
Linde plc | | | 6 | | | | 1,038 | |
Ecolab, Inc. | | | 3 | | | | 467 | |
Sherwin-Williams Co. | | | 1 | | | | 460 | |
Newmont Corp. | | | 9 | | | | 407 | |
Air Products & Chemicals, Inc. | | | 2 | | | | 399 | |
DuPont de Nemours, Inc. | | | 8 | | | | 273 | |
PPG Industries, Inc. | | | 3 | | | | 251 | |
Dow, Inc. | | | 8 | | | | 234 | |
LyondellBasell Industries N.V. — Class A | | | 3 | | | | 149 | |
International Paper Co. | | | 4 | | | | 125 | |
Nucor Corp. | | | 3 | | | | 108 | |
Freeport-McMoRan, Inc. | | | 16 | | | | 108 | |
International Flavors & Fragrances, Inc. | | | 1 | | | | 102 | |
FMC Corp. | | | 1 | | | | 82 | |
Celanese Corp. — Class A | | | 1 | | | | 73 | |
Albemarle Corp. | | | 1 | | | | 56 | |
CF Industries Holdings, Inc. | | | 2 | | | | 54 | |
Eastman Chemical Co. | | | 1 | | | | 47 | |
Mosaic Co. | | | 4 | | | | 43 | |
Total Basic Materials | | | | | | | 4,476 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $178,194) | | | | | | | 228,808 | |
| | | | | | | | | |
MUTUAL FUNDS† - 39.3% |
Guggenheim Strategy Fund II2 | | | 468,262 | | | | 11,261,712 | |
Guggenheim Ultra Short Duration Fund — Institutional Class2 | | | 793,141 | | | | 7,748,990 | |
Guggenheim Strategy Fund III2 | | | 70,834 | | | | 1,704,973 | |
Total Mutual Funds | | | | |
(Cost $21,272,000) | | | | | | | 20,715,675 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY DISCOUNT NOTES†† - 7.8% |
Federal Home Loan Bank |
0.05% due 04/01/203 | | $ | 4,109,000 | | | | 4,109,000 | |
Total Federal Agency Discount Notes | | | | |
(Cost $4,109,000) | | | | | | | 4,109,000 | |
| | | | | | | | | |
U.S. TREASURY BILLS†† - 1.8% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 916,000 | | | | 915,959 | |
Total U.S. Treasury Bills | | | | |
(Cost $915,625) | | | | | | | 915,959 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,5 - 24.8% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | | 9,455,551 | | | | 9,455,551 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 3,636,751 | | | | 3,636,751 | |
Total Repurchase Agreements | | | | |
(Cost $13,092,302) | | | | | | | 13,092,302 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,7 - 0.0% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%8 | | | 80 | | | | 80 | |
Total Securities Lending Collateral | | | | |
(Cost $80) | | | | | | | 80 | |
| | | | | | | | | |
Total Investments - 74.1% | | | | |
(Cost $39,567,201) | | $ | 39,061,824 | |
Other Assets & Liabilities, net - 25.9% | | | 13,637,033 | |
Total Net Assets - 100.0% | | $ | 52,698,857 | |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
NOVA FUND | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
S&P 500 Index Mini Futures Contracts | | | 25 | | | | Jun 2020 | | | $ | 3,215,625 | | | $ | 5,787 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Depreciation | |
OTC Equity Index Swap Agreements†† |
BNP Paribas | S&P 500 Index | 1.54% (1 Month USD LIBOR + 0.55%) | At Maturity | | | 04/29/20 | | | | 345 | | | $ | 891,525 | | | $ | (15,687 | ) |
Barclays Bank plc | S&P 500 Index | 1.04% (1 Week USD LIBOR + 0.45%) | At Maturity | | | 04/30/20 | | | | 13,925 | | | | 35,989,255 | | | | (585,667 | ) |
Goldman Sachs International | S&P 500 Index | 1.04% (1 Week USD LIBOR + 0.45%) | At Maturity | | | 04/28/20 | | | | 15,009 | | | | 38,790,883 | | | | (650,970 | ) |
| | | | | | | | | | | | | | $ | 75,671,663 | | | $ | (1,252,324 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
NOVA FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 228,808 | | | $ | — | | | $ | — | | | $ | 228,808 | |
Mutual Funds | | | 20,715,675 | | | | — | | | | — | | | | 20,715,675 | |
Federal Agency Discount Notes | | | — | | | | 4,109,000 | | | | — | | | | 4,109,000 | |
U.S. Treasury Bills | | | — | | | | 915,959 | | | | — | | | | 915,959 | |
Repurchase Agreements | | | — | | | | 13,092,302 | | | | — | | | | 13,092,302 | |
Securities Lending Collateral | | | 80 | | | | — | | | | — | | | | 80 | |
Equity Futures Contracts** | | | 5,787 | | | | — | | | | — | | | | 5,787 | |
Total Assets | | $ | 20,950,350 | | | $ | 18,117,261 | | | $ | — | | | $ | 39,067,611 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 1,252,324 | | | $ | — | | | $ | 1,252,324 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 15,241,850 | | | $ | 1,400,001 | | | $ | (5,000,000 | ) | | $ | (60,844 | ) | | $ | (319,295 | ) | | $ | 11,261,712 | | | | 468,262 | | | $ | 386,488 | |
Guggenheim Strategy Fund III | | | 6,937,830 | | | | — | | | | (5,000,000 | ) | | | (228,442 | ) | | | (4,415 | ) | | | 1,704,973 | | | | 70,834 | | | | 187,512 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 10,837,820 | | | | 6,200,000 | | | | (9,000,000 | ) | | | (130,981 | ) | | | (157,849 | ) | | | 7,748,990 | | | | 793,141 | | | | 293,396 | |
| | | $ | 33,017,500 | | | $ | 7,600,001 | | | $ | (19,000,000 | ) | | $ | (420,267 | ) | | $ | (481,559 | ) | | $ | 20,715,675 | | | | | | | $ | 867,396 | |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value - including $78 of securities loaned (cost $5,202,899) | | $ | 5,253,847 | |
Investments in affiliated issuers, at value (cost $21,272,000) | | | 20,715,675 | |
Repurchase agreements, at value (cost $13,092,302) | | | 13,092,302 | |
Cash | | | 5,607,861 | |
Segregated cash with broker | | | 9,773,076 | |
Receivables: |
Fund shares sold | | | 714,052 | |
Dividends | | | 78,815 | |
Variation margin on futures contracts | | | 5,787 | |
Interest | | | 3 | |
Securities lending income | | | 2 | |
Total assets | | | 55,241,420 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 1,252,324 | |
Payable for: |
Fund shares redeemed | | | 893,304 | |
Swap settlement | | | 141,418 | |
Management fees | | | 51,319 | |
Transfer agent and administrative fees | | | 31,367 | |
Portfolio accounting fees | | | 7,208 | |
Distribution and service fees | | | 7,084 | |
Trustees’ fees | | | 2,285 | |
Return of securities lending collateral | | | 80 | |
Miscellaneous | | | 156,174 | |
Total liabilities | | | 2,542,563 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 52,698,857 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 89,081,688 | |
Total distributable earnings (loss) | | | (36,382,831 | ) |
Net assets | | $ | 52,698,857 | |
| | | | | |
Investor Class: |
Net assets | | $ | 37,874,256 | |
Capital shares outstanding | | | 595,274 | |
Net asset value per share | | $ | 63.62 | |
| | | | | |
A-Class: |
Net assets | | $ | 7,434,726 | |
Capital shares outstanding | | | 126,246 | |
Net asset value per share | | $ | 58.89 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 61.83 | |
| | | | | |
C-Class: |
Net assets | | $ | 3,333,339 | |
Capital shares outstanding | | | 64,387 | |
Net asset value per share | | $ | 51.77 | |
| | | | | |
H-Class: |
Net assets | | $ | 4,056,536 | |
Capital shares outstanding | | | 68,827 | |
Net asset value per share | | $ | 58.94 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $3) | | $ | 4,374,714 | |
Dividends from securities of affiliated issuers | | | 867,396 | |
Interest | | | 852,546 | |
Income from securities lending, net | | | 1,637 | |
Total investment income | | | 6,096,293 | |
| | | | | |
Expenses: |
Management fees | | | 2,197,594 | |
Distribution and service fees: |
A-Class | | | 53,586 | |
C-Class | | | 41,906 | |
H-Class | | | 103,821 | |
Transfer agent and administrative fees | | | 745,879 | |
Portfolio accounting fees | | | 275,241 | |
Registration fees | | | 249,295 | |
Professional fees | | | 126,079 | |
Printing fees | | | 69,117 | |
Trustees’ fees* | | | 63,958 | |
Pricing fees | | | 63,256 | |
Custodian fees | | | 41,816 | |
Line of credit fees | | | 1,677 | |
Miscellaneous | | | 190,701 | |
Total expenses | | | 4,223,926 | |
Less: |
Expenses waived by Adviser | | $ | (31,034 | ) |
Net expenses | | | 4,192,892 | |
Net investment income | | | 1,903,401 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 13,460,339 | |
Investments in affiliated issuers | | | (420,267 | ) |
Swap agreements | | | (17,155,385 | ) |
Futures contracts | | | 684,381 | |
Net realized loss | | | (3,430,932 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (19,515,504 | ) |
Investments in affiliated issuers | | | (481,559 | ) |
Swap agreements | | | (2,583,813 | ) |
Futures contracts | | | (2,973,895 | ) |
Net change in unrealized appreciation (depreciation) | | | (25,554,771 | ) |
Net realized and unrealized loss | | | (28,985,703 | ) |
Net decrease in net assets resulting from operations | | $ | (27,082,302 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 1,903,401 | | | $ | 2,138,897 | |
Net realized gain (loss) on investments | | | (3,430,932 | ) | | | 7,243,373 | |
Net change in unrealized appreciation (depreciation) on investments | | | (25,554,771 | ) | | | 31,370,800 | |
Net increase (decrease) in net assets resulting from operations | | | (27,082,302 | ) | | | 40,753,070 | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 1,884,601,216 | | | | 3,267,814,139 | |
A-Class | | | 134,948,538 | | | | 284,034,909 | |
C-Class | | | 1,007,068 | | | | 17,370,012 | |
H-Class | | | 389,155,191 | | | | 512,367,614 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (2,067,340,105 | ) | | | (3,509,187,067 | ) |
A-Class | | | (150,323,713 | ) | | | (296,190,807 | ) |
C-Class | | | (1,175,937 | ) | | | (23,997,212 | ) |
H-Class | | | (433,198,924 | ) | | | (496,652,060 | ) |
Net decrease from capital share transactions | | | (242,326,666 | ) | | | (244,440,472 | ) |
Net decrease in net assets | | | (269,408,968 | ) | | | (203,687,402 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 322,107,825 | | | | 525,795,227 | |
End of year | | $ | 52,698,857 | | | $ | 322,107,825 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 22,279,494 | | | | 44,886,045 | |
A-Class | | | 1,760,253 | | | | 4,152,405 | |
C-Class | | | 16,542 | | | | 281,514 | |
H-Class | | | 4,984,254 | | | | 7,575,202 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (24,844,947 | ) | | | (48,213,160 | ) |
A-Class | | | (1,999,067 | ) | | | (4,329,588 | ) |
C-Class | | | (18,108 | ) | | | (387,815 | ) |
H-Class | | | (5,603,433 | ) | | | (7,334,463 | ) |
Net decrease in shares | | | (3,425,012 | ) | | | (3,369,860 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 76.83 | | | $ | 69.63 | | | $ | 60.14 | | | $ | 49.18 | | | $ | 49.42 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .61 | | | | .48 | | | | .40 | | | | .08 | | | | .07 | |
Net gain (loss) on investments (realized and unrealized) | | | (13.82 | ) | | | 6.72 | | | | 10.50 | | | | 11.56 | | | | (.25 | ) |
Total from investment operations | | | (13.21 | ) | | | 7.20 | | | | 10.90 | | | | 11.64 | | | | (.18 | ) |
Less distributions from: |
Net investment income | | | — | | | | — | | | | (.02 | ) | | | (.02 | ) | | | (.06 | ) |
Net realized gains | | | — | | | | — | | | | (1.39 | ) | | | (.66 | ) | | | — | |
Total distributions | | | — | | | | — | | | | (1.41 | ) | | | (.68 | ) | | | (.06 | ) |
Net asset value, end of period | | $ | 63.62 | | | $ | 76.83 | | | $ | 69.63 | | | $ | 60.14 | | | $ | 49.18 | |
|
Total Return | | | (17.19 | %) | | | 10.34 | % | | | 18.09 | % | | | 23.84 | % | | | (0.36 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 37,874 | | | $ | 242,831 | | | $ | 451,764 | | | $ | 78,531 | | | $ | 164,820 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.71 | % | | | 0.65 | % | | | 0.58 | % | | | 0.15 | % | | | 0.14 | % |
Total expensesb | | | 1.37 | % | | | 1.35 | % | | | 1.26 | % | | | 1.28 | % | | | 1.25 | % |
Net expensesc | | | 1.36 | % | | | 1.35 | % | | | 1.26 | % | | | 1.28 | % | | | 1.25 | % |
Portfolio turnover rate | | | 690 | % | | | 1,078 | % | | | 2,067 | % | | | 1,288 | % | | | 619 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 71.28 | | | $ | 64.72 | | | $ | 56.18 | | | $ | 46.08 | | | $ | 46.40 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .40 | | | | .28 | | | | .25 | | | | (.02 | ) | | | (.05 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (12.79 | ) | | | 6.28 | | | | 9.70 | | | | 10.80 | | | | (.21 | ) |
Total from investment operations | | | (12.39 | ) | | | 6.56 | | | | 9.95 | | | | 10.78 | | | | (.26 | ) |
Less distributions from: |
Net investment income | | | — | | | | — | | | | (.02 | ) | | | (.02 | ) | | | (.06 | ) |
Net realized gains | | | — | | | | — | | | | (1.39 | ) | | | (.66 | ) | | | — | |
Total distributions | | | — | | | | — | | | | (1.41 | ) | | | (.68 | ) | | | (.06 | ) |
Net asset value, end of period | | $ | 58.89 | | | $ | 71.28 | | | $ | 64.72 | | | $ | 56.18 | | | $ | 46.08 | |
|
Total Returnd | | | (17.38 | %) | | | 10.14 | % | | | 17.68 | % | | | 23.57 | % | | | (0.56 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 7,435 | | | $ | 26,022 | | | $ | 35,094 | | | $ | 3,528 | | | $ | 13,626 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.52 | % | | | 0.41 | % | | | 0.39 | % | | | (0.05 | %) | | | (0.11 | %) |
Total expensesb | | | 1.62 | % | | | 1.60 | % | | | 1.51 | % | | | 1.53 | % | | | 1.51 | % |
Net expensesc | | | 1.61 | % | | | 1.60 | % | | | 1.51 | % | | | 1.53 | % | | | 1.51 | % |
Portfolio turnover rate | | | 690 | % | | | 1,078 | % | | | 2,067 | % | | | 1,288 | % | | | 619 | % |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 63.15 | | | $ | 57.77 | | | $ | 50.57 | | | $ | 41.86 | | | $ | 42.50 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.22 | ) | | | (.20 | ) | | | (.27 | ) | | | (.40 | ) | | | (.34 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (11.16 | ) | | | 5.58 | | | | 8.88 | | | | 9.79 | | | | (.24 | ) |
Total from investment operations | | | (11.38 | ) | | | 5.38 | | | | 8.61 | | | | 9.39 | | | | (.58 | ) |
Less distributions from: |
Net investment income | | | — | | | | — | | | | (.02 | ) | | | (.02 | ) | | | (.06 | ) |
Net realized gains | | | — | | | | — | | | | (1.39 | ) | | | (.66 | ) | | | — | |
Total distributions | | | — | | | | — | | | | (1.41 | ) | | | (.68 | ) | | | (.06 | ) |
Net asset value, end of period | | $ | 51.77 | | | $ | 63.15 | | | $ | 57.77 | | | $ | 50.57 | | | $ | 41.86 | |
|
Total Returnd | | | (18.02 | %) | | | 9.31 | % | | | 17.01 | % | | | 22.60 | % | | | (1.36 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,333 | | | $ | 4,165 | | | $ | 9,952 | | | $ | 9,676 | | | $ | 11,090 | |
Ratios to average net assets: |
Net investment income (loss) | | | (.32 | %) | | | (0.33 | %) | | | (0.48 | %) | | | (0.89 | %) | | | (0.83 | %) |
Total expensesb | | | 2.38 | % | | | 2.35 | % | | | 2.28 | % | | | 2.27 | % | | | 2.26 | % |
Net expensesc | | | 2.37 | % | | | 2.35 | % | | | 2.28 | % | | | 2.27 | % | | | 2.26 | % |
Portfolio turnover rate | | | 690 | % | | | 1,078 | % | | | 2,067 | % | | | 1,288 | % | | | 619 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 71.35 | | | $ | 64.80 | | | $ | 56.15 | | | $ | 46.06 | | | $ | 46.40 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .36 | | | | .30 | | | | .19 | | | | (.07 | ) | | | (.06 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (12.77 | ) | | | 6.25 | | | | 9.87 | | | | 10.84 | | | | (.22 | ) |
Total from investment operations | | | (12.41 | ) | | | 6.55 | | | | 10.06 | | | | 10.77 | | | | (.28 | ) |
Less distributions from: |
Net investment income | | | — | | | | — | | | | (.02 | ) | | | (.02 | ) | | | (.06 | ) |
Net realized gains | | | — | | | | — | | | | (1.39 | ) | | | (.66 | ) | | | — | |
Total distributions | | | — | | | | — | | | | (1.41 | ) | | | (.68 | ) | | | (.06 | ) |
Net asset value, end of period | | $ | 58.94 | | | $ | 71.35 | | | $ | 64.80 | | | $ | 56.15 | | | $ | 46.06 | |
|
Total Return | | | (17.39 | %) | | | 10.11 | % | | | 17.88 | % | | | 23.56 | % | | | (0.60 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 4,057 | | | $ | 49,090 | | | $ | 28,985 | | | $ | 17,716 | | | $ | 13,938 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.46 | % | | | 0.44 | % | | | 0.30 | % | | | (0.15 | %) | | | (0.14 | %) |
Total expensesb | | | 1.62 | % | | | 1.61 | % | | | 1.52 | % | | | 1.52 | % | | | 1.51 | % |
Net expensesc | | | 1.61 | % | | | 1.61 | % | | | 1.52 | % | | | 1.52 | % | | | 1.51 | % |
Portfolio turnover rate | | | 690 | % | | | 1,078 | % | | | 2,067 | % | | | 1,288 | % | | | 619 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Does not include expenses of the underlying funds in which the Fund invests. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Total return does not reflect the impact of any applicable sales charges. |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
S&P 500® FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the S&P 500® Index (the “underlying index”).
For the one-year period ended March 31, 2020, S&P 500® Fund maintained a daily correlation of over 99% to its benchmark of the daily price movement of the S&P 500 Index.
S&P 500® Fund H-Class returned -8.65%, while the S&P 500 Index returned -6.98%.
The only sector contributing to the return of the underlying index was Information Technology. The sectors detracting the most were Energy, Financials, and Industrials.
The holdings contributing the most to the return of the underlying index were Microsoft Corp., Apple, Inc., and Amazon.com, Inc. The holdings detracting the most were Exxon Mobil Corp., Boeing Co., and Chevron Corp.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | May 31, 2006 |
C-Class | May 31, 2006 |
H-Class | May 31, 2006 |
Ten Largest Holdings (% of Total Net Assets) |
Microsoft Corp. | 3.4% |
Apple, Inc. | 3.0% |
Amazon.com, Inc. | 2.3% |
Facebook, Inc. — Class A | 1.1% |
Berkshire Hathaway, Inc. — Class B | 1.0% |
Alphabet, Inc. — Class A | 1.0% |
Alphabet, Inc. — Class C | 1.0% |
Johnson & Johnson | 1.0% |
JPMorgan Chase & Co. | 0.8% |
Visa, Inc. — Class A | 0.8% |
Top Ten Total | 15.4% |
| | |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (8.67%) | 4.90% | 8.71% |
A-Class Shares with sales charge‡ | (13.01%) | 3.89% | 8.18% |
C-Class Shares | (9.35%) | 4.12% | 7.87% |
C-Class Shares with CDSC§ | (10.24%) | 4.12% | 7.87% |
H-Class Shares | (8.65%) | 4.90% | 8.71% |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fees structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
28 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
S&P 500® FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 60.7% |
| | | | | | | | | |
Consumer, Non-cyclical - 14.3% |
Johnson & Johnson | | | 10,038 | | | $ | 1,316,283 | |
Procter & Gamble Co. | | | 9,512 | | | | 1,046,320 | |
UnitedHealth Group, Inc. | | | 3,614 | | | | 901,259 | |
Merck & Company, Inc. | | | 9,711 | | | | 747,164 | |
Pfizer, Inc. | | | 21,108 | | | | 688,965 | |
Coca-Cola Co. | | | 14,708 | | | | 650,829 | |
PepsiCo, Inc. | | | 5,319 | | | | 638,812 | |
Abbott Laboratories | | | 6,741 | | | | 531,932 | |
Bristol-Myers Squibb Co. | | | 8,941 | | | | 498,371 | |
Medtronic plc | | | 5,112 | | | | 461,000 | |
Amgen, Inc. | | | 2,266 | | | | 459,386 | |
Eli Lilly & Co. | | | 3,223 | | | | 447,095 | |
Thermo Fisher Scientific, Inc. | | | 1,529 | | | | 433,624 | |
Philip Morris International, Inc. | | | 5,934 | | | | 432,945 | |
AbbVie, Inc. | | | 5,640 | | | | 429,712 | |
PayPal Holdings, Inc.* | | | 4,479 | | | | 428,819 | |
Gilead Sciences, Inc. | | | 4,825 | | | | 360,717 | |
Danaher Corp. | | | 2,438 | | | | 337,444 | |
CVS Health Corp. | | | 4,962 | | | | 294,395 | |
Altria Group, Inc. | | | 7,125 | | | | 275,524 | |
Mondelez International, Inc. — Class A | | | 5,492 | | | | 275,039 | |
Cigna Corp. | | | 1,424 | | | | 252,304 | |
Becton Dickinson and Co. | | | 1,032 | | | | 237,123 | |
Vertex Pharmaceuticals, Inc.* | | | 981 | | | | 233,429 | |
S&P Global, Inc. | | | 932 | | | | 228,387 | |
Automatic Data Processing, Inc. | | | 1,650 | | | | 225,522 | |
Allergan plc | | | 1,252 | | | | 221,729 | |
Anthem, Inc. | | | 967 | | | | 219,548 | |
Intuitive Surgical, Inc.* | | | 441 | | | | 218,388 | |
Biogen, Inc.* | | | 688 | | | | 217,669 | |
Colgate-Palmolive Co. | | | 3,269 | | | | 216,931 | |
Zoetis, Inc. | | | 1,817 | | | | 213,843 | |
Stryker Corp. | | | 1,228 | | | | 204,450 | |
Boston Scientific Corp.* | | | 5,316 | | | | 173,461 | |
Kimberly-Clark Corp. | | | 1,308 | | | | 167,254 | |
Global Payments, Inc. | | | 1,146 | | | | 165,288 | |
Humana, Inc. | | | 505 | | | | 158,580 | |
Baxter International, Inc. | | | 1,947 | | | | 158,077 | |
Illumina, Inc.* | | | 561 | | | | 153,220 | |
Edwards Lifesciences Corp.* | | | 796 | | | | 150,142 | |
Regeneron Pharmaceuticals, Inc.* | | | 305 | | | | 148,928 | |
Estee Lauder Companies, Inc. — Class A | | | 849 | | | | 135,280 | |
Centene Corp.* | | | 2,227 | | | | 132,306 | |
Moody’s Corp. | | | 619 | | | | 130,918 | |
General Mills, Inc. | | | 2,305 | | | | 121,635 | |
Kroger Co. | | | 3,059 | | | | 92,137 | |
IHS Markit Ltd. | | | 1,529 | | | | 91,740 | |
Constellation Brands, Inc. — Class A | | | 639 | | | | 91,607 | |
HCA Healthcare, Inc. | | | 1,009 | | | | 90,659 | |
Sysco Corp. | | | 1,946 | | | | 88,796 | |
Verisk Analytics, Inc. — Class A | | | 625 | | | | 87,113 | |
McKesson Corp. | | | 616 | | | | 83,320 | |
Clorox Co. | | | 479 | | | | 82,987 | |
Monster Beverage Corp.* | | | 1,456 | | | | 81,915 | |
ResMed, Inc. | | | 548 | | | | 80,715 | |
Zimmer Biomet Holdings, Inc. | | | 785 | | | | 79,348 | |
IDEXX Laboratories, Inc.* | | | 327 | | | | 79,212 | |
Alexion Pharmaceuticals, Inc.* | | | 844 | | | | 75,783 | |
Hershey Co. | | | 566 | | | | 74,995 | |
Archer-Daniels-Midland Co. | | | 2,123 | | | | 74,687 | |
IQVIA Holdings, Inc.* | | | 688 | | | | 74,208 | |
Corteva, Inc. | | | 2,855 | | | | 67,093 | |
McCormick & Company, Inc. | | | 471 | | | | 66,510 | |
Tyson Foods, Inc. — Class A | | | 1,126 | | | | 65,162 | |
FleetCor Technologies, Inc.* | | | 331 | | | | 61,745 | |
Church & Dwight Company, Inc. | | | 936 | | | | 60,072 | |
Kraft Heinz Co. | | | 2,375 | | | | 58,757 | |
Kellogg Co. | | | 950 | | | | 56,991 | |
Cintas Corp. | | | 320 | | | | 55,430 | |
Equifax, Inc. | | | 462 | | | | 55,186 | |
Conagra Brands, Inc. | | | 1,856 | | | | 54,455 | |
Cardinal Health, Inc. | | | 1,116 | | | | 53,501 | |
Cooper Companies, Inc. | | | 189 | | | | 52,102 | |
Teleflex, Inc. | | | 177 | | | | 51,836 | |
AmerisourceBergen Corp. — Class A | | | 573 | | | | 50,710 | |
Incyte Corp.* | | | 682 | | | | 49,943 | |
Hormel Foods Corp. | | | 1,061 | | | | 49,485 | |
JM Smucker Co. | | | 435 | | | | 48,285 | |
MarketAxess Holdings, Inc. | | | 145 | | | | 48,223 | |
Align Technology, Inc.* | | | 274 | | | | 47,662 | |
Laboratory Corporation of America Holdings* | | | 370 | | | | 46,764 | |
STERIS plc | | | 323 | | | | 45,210 | |
Quest Diagnostics, Inc. | | | 514 | | | | 41,274 | |
Brown-Forman Corp. — Class B | | | 695 | | | | 38,579 | |
Hologic, Inc.* | | | 1,023 | | | | 35,907 | |
Varian Medical Systems, Inc.* | | | 347 | | | | 35,623 | |
Gartner, Inc.* | | | 341 | | | | 33,953 | |
Dentsply Sirona, Inc. | | | 848 | | | | 32,928 | |
Avery Dennison Corp. | | | 318 | | | | 32,395 | |
Lamb Weston Holdings, Inc. | | | 557 | | | | 31,805 | |
Universal Health Services, Inc. — Class B | | | 306 | | | | 30,318 | |
Campbell Soup Co. | | | 644 | | | | 29,727 | |
United Rentals, Inc.* | | | 287 | | | | 29,532 | |
Mylan N.V.* | | | 1,969 | | | | 29,358 | |
Henry Schein, Inc.* | | | 560 | | | | 28,291 | |
Molson Coors Beverage Co. — Class B | | | 717 | | | | 27,970 | |
DaVita, Inc.* | | | 342 | | | | 26,013 | |
ABIOMED, Inc.* | | | 172 | | | | 24,968 | |
Perrigo Company plc | | | 519 | | | | 24,959 | |
Rollins, Inc. | | | 537 | | | | 19,407 | |
Quanta Services, Inc. | | | 543 | | | | 17,229 | |
Nielsen Holdings plc | | | 1,357 | | | | 17,017 | |
Robert Half International, Inc. | | | 448 | | | | 16,912 | |
H&R Block, Inc. | | | 745 | | | | 10,490 | |
Coty, Inc. — Class A | | | 1,127 | | | | 5,815 | |
Total Consumer, Non-cyclical | | | | | | | 19,234,861 | |
| | | | | | | | | |
Technology - 12.8% |
Microsoft Corp. | | | 29,097 | | | | 4,588,888 | |
Apple, Inc. | | | 15,930 | | | | 4,050,840 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
S&P 500® FUND | |
| | Shares | | | Value | |
Intel Corp. | | | 16,592 | | | $ | 897,959 | |
NVIDIA Corp. | | | 2,334 | | | | 615,242 | |
Adobe, Inc.* | | | 1,846 | | | | 587,471 | |
salesforce.com, Inc.* | | | 3,383 | | | | 487,084 | |
Oracle Corp. | | | 8,263 | | | | 399,351 | |
Accenture plc — Class A | | | 2,422 | | | | 395,416 | |
International Business Machines Corp. | | | 3,378 | | | | 374,721 | |
Broadcom, Inc. | | | 1,513 | | | | 358,732 | |
Texas Instruments, Inc. | | | 3,565 | | | | 356,250 | |
QUALCOMM, Inc. | | | 4,355 | | | | 294,616 | |
Fidelity National Information Services, Inc. | | | 2,344 | | | | 285,124 | |
Intuit, Inc. | | | 993 | | | | 228,390 | |
Fiserv, Inc.* | | | 2,178 | | | | 206,888 | |
ServiceNow, Inc.* | | | 719 | | | | 206,051 | |
Advanced Micro Devices, Inc.* | | | 4,461 | | | | 202,886 | |
Micron Technology, Inc.* | | | 4,222 | | | | 177,577 | |
Activision Blizzard, Inc. | | | 2,930 | | | | 174,276 | |
Applied Materials, Inc. | | | 3,523 | | | | 161,424 | |
Lam Research Corp. | | | 553 | | | | 132,720 | |
Autodesk, Inc.* | | | 839 | | | | 130,968 | |
Analog Devices, Inc. | | | 1,405 | | | | 125,958 | |
Electronic Arts, Inc.* | | | 1,114 | | | | 111,589 | |
HP, Inc. | | | 5,652 | | | | 98,119 | |
Cognizant Technology Solutions Corp. — Class A | | | 2,088 | | | | 97,029 | |
MSCI, Inc. — Class A | | | 323 | | | | 93,334 | |
KLA Corp. | | | 602 | | | | 86,532 | |
Paychex, Inc. | | | 1,215 | | | | 76,448 | |
ANSYS, Inc.* | | | 326 | | | | 75,785 | |
Cerner Corp. | | | 1,198 | | | | 75,462 | |
Xilinx, Inc. | | | 959 | | | | 74,745 | |
Synopsys, Inc.* | | | 573 | | | | 73,797 | |
Cadence Design Systems, Inc.* | | | 1,070 | | | | 70,663 | |
Citrix Systems, Inc. | | | 439 | | | | 62,140 | |
Microchip Technology, Inc. | | | 911 | | | | 61,766 | |
Skyworks Solutions, Inc. | | | 650 | | | | 58,097 | |
Akamai Technologies, Inc.* | | | 616 | | | | 56,358 | |
Fortinet, Inc.* | | | 541 | | | | 54,733 | |
Take-Two Interactive Software, Inc.* | | | 432 | | | | 51,240 | |
Maxim Integrated Products, Inc. | | | 1,032 | | | | 50,166 | |
Hewlett Packard Enterprise Co. | | | 4,936 | | | | 47,929 | |
Western Digital Corp. | | | 1,134 | | | | 47,197 | |
Leidos Holdings, Inc. | | | 508 | | | | 46,558 | |
Jack Henry & Associates, Inc. | | | 293 | | | | 45,485 | |
Seagate Technology plc | | | 882 | | | | 43,042 | |
Broadridge Financial Solutions, Inc. | | | 437 | | | | 41,441 | |
Zebra Technologies Corp. — Class A* | | | 206 | | | | 37,822 | |
Paycom Software, Inc.* | | | 187 | | | | 37,776 | |
NetApp, Inc. | | | 870 | | | | 36,270 | |
Qorvo, Inc.* | | | 443 | | | | 35,719 | |
IPG Photonics Corp.* | | | 136 | | | | 14,998 | |
Xerox Holdings Corp. | | | 709 | | | | 13,428 | |
DXC Technology Co. | | | 976 | | | | 12,737 | |
Total Technology | | | | | | | 17,227,237 | |
| | | | | | | | | |
Communications - 9.6% |
Amazon.com, Inc.* | | | 1,588 | | | | 3,096,155 | |
Facebook, Inc. — Class A* | | | 9,179 | | | | 1,531,057 | |
Alphabet, Inc. — Class A* | | | 1,143 | | | | 1,328,109 | |
Alphabet, Inc. — Class C* | | | 1,140 | | | | 1,325,604 | |
Verizon Communications, Inc. | | | 15,774 | | | | 847,537 | |
AT&T, Inc. | | | 27,862 | | | | 812,177 | |
Walt Disney Co. | | | 6,875 | | | | 664,125 | |
Cisco Systems, Inc. | | | 16,181 | | | | 636,075 | |
Netflix, Inc.* | | | 1,672 | | | | 627,836 | |
Comcast Corp. — Class A | | | 17,315 | | | | 595,290 | |
Charter Communications, Inc. — Class A* | | | 598 | | | | 260,913 | |
Booking Holdings, Inc.* | | | 160 | | | | 215,251 | |
T-Mobile US, Inc.* | | | 1,207 | | | | 101,267 | |
eBay, Inc. | | | 2,917 | | | | 87,685 | |
Motorola Solutions, Inc. | | | 654 | | | | 86,930 | |
Twitter, Inc.* | | | 2,961 | | | | 72,722 | |
VeriSign, Inc.* | | | 394 | | | | 70,956 | |
Corning, Inc. | | | 2,933 | | | | 60,244 | |
CDW Corp. | | | 548 | | | | 51,112 | |
Omnicom Group, Inc. | | | 830 | | | | 45,567 | |
Arista Networks, Inc.* | | | 207 | | | | 41,928 | |
NortonLifeLock, Inc. | | | 2,187 | | | | 40,919 | |
CenturyLink, Inc. | | | 3,742 | | | | 35,399 | |
Fox Corp. — Class A | | | 1,352 | | | | 31,948 | |
Expedia Group, Inc. | | | 533 | | | | 29,992 | |
ViacomCBS, Inc. — Class B | | | 2,061 | | | | 28,875 | |
F5 Networks, Inc.* | | | 232 | | | | 24,738 | |
Juniper Networks, Inc. | | | 1,277 | | | | 24,442 | |
Interpublic Group of Companies, Inc. | | | 1,479 | | | | 23,945 | |
Discovery, Inc. — Class C* | | | 1,279 | | | | 22,434 | |
DISH Network Corp. — Class A* | | | 976 | | | | 19,510 | |
Fox Corp. — Class B | | | 619 | | | | 14,163 | |
News Corp. — Class A | | | 1,482 | | | | 13,301 | |
Discovery, Inc. — Class A* | | | 603 | | | | 11,722 | |
News Corp. — Class B | | | 464 | | | | 4,171 | |
Total Communications | | | | | | | 12,884,099 | |
| | | | | | | | | |
Financial - 9.5% |
Berkshire Hathaway, Inc. — Class B* | | | 7,461 | | | | 1,364,095 | |
JPMorgan Chase & Co. | | | 11,963 | | | | 1,077,029 | |
Visa, Inc. — Class A | | | 6,529 | | | | 1,051,952 | |
Mastercard, Inc. — Class A | | | 3,386 | | | | 817,922 | |
Bank of America Corp. | | | 30,878 | | | | 655,540 | |
Wells Fargo & Co. | | | 14,680 | | | | 421,316 | |
American Tower Corp. — Class A REIT | | | 1,689 | | | | 367,780 | |
Citigroup, Inc. | | | 8,327 | | | | 350,733 | |
CME Group, Inc. — Class A | | | 1,367 | | | | 236,368 | |
Crown Castle International Corp. REIT | | | 1,586 | | | | 229,018 | |
Prologis, Inc. REIT | | | 2,816 | | | | 226,322 | |
American Express Co. | | | 2,559 | | | | 219,076 | |
Equinix, Inc. REIT | | | 325 | | | | 202,985 | |
BlackRock, Inc. — Class A | | | 450 | | | | 197,987 | |
Chubb Ltd. | | | 1,729 | | | | 193,112 | |
Goldman Sachs Group, Inc. | | | 1,215 | | | | 187,827 | |
U.S. Bancorp | | | 5,421 | | | | 186,753 | |
Intercontinental Exchange, Inc. | | | 2,124 | | | | 171,513 | |
Marsh & McLennan Companies, Inc. | | | 1,925 | | | | 166,435 | |
Progressive Corp. | | | 2,230 | | | | 164,663 | |
PNC Financial Services Group, Inc. | | | 1,671 | | | | 159,948 | |
Truist Financial Corp. | | | 5,115 | | | | 157,747 | |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
S&P 500® FUND | |
| | Shares | | | Value | |
Morgan Stanley | | | 4,442 | | | $ | 151,028 | |
Aon plc | | | 893 | | | | 147,381 | |
Charles Schwab Corp. | | | 4,361 | | | | 146,617 | |
Digital Realty Trust, Inc. REIT | | | 1,003 | | | | 139,327 | |
SBA Communications Corp. REIT | | | 429 | | | | 115,817 | |
Public Storage REIT | | | 573 | | | | 113,804 | |
Allstate Corp. | | | 1,236 | | | | 113,378 | |
Bank of New York Mellon Corp. | | | 3,201 | | | | 107,810 | |
Travelers Companies, Inc. | | | 984 | | | | 97,760 | |
Aflac, Inc. | | | 2,800 | | | | 95,872 | |
MetLife, Inc. | | | 2,981 | | | | 91,129 | |
Capital One Financial Corp. | | | 1,776 | | | | 89,546 | |
T. Rowe Price Group, Inc. | | | 891 | | | | 87,006 | |
Willis Towers Watson plc | | | 490 | | | | 83,226 | |
Equity Residential REIT | | | 1,331 | | | | 82,136 | |
American International Group, Inc. | | | 3,318 | | | | 80,461 | |
Prudential Financial, Inc. | | | 1,533 | | | | 79,931 | |
AvalonBay Communities, Inc. REIT | | | 533 | | | | 78,442 | |
State Street Corp. | | | 1,387 | | | | 73,885 | |
Welltower, Inc. REIT | | | 1,548 | | | | 70,867 | |
Realty Income Corp. REIT | | | 1,307 | | | | 65,167 | |
Simon Property Group, Inc. REIT | | | 1,170 | | | | 64,186 | |
Alexandria Real Estate Equities, Inc. REIT | | | 468 | | | | 64,144 | |
Northern Trust Corp. | | | 808 | | | | 60,972 | |
Arthur J Gallagher & Co. | | | 711 | | | | 57,954 | |
Essex Property Trust, Inc. REIT | | | 252 | | | | 55,500 | |
First Republic Bank | | | 643 | | | | 52,906 | |
M&T Bank Corp. | | | 503 | | | | 52,025 | |
Boston Properties, Inc. REIT | | | 548 | | | | 50,542 | |
Ameriprise Financial, Inc. | | | 483 | | | | 49,498 | |
Hartford Financial Services Group, Inc. | | | 1,375 | | | | 48,455 | |
Weyerhaeuser Co. REIT | | | 2,842 | | | | 48,172 | |
CBRE Group, Inc. — Class A* | | | 1,277 | | | | 48,155 | |
Extra Space Storage, Inc. REIT | | | 494 | | | | 47,305 | |
Duke Realty Corp. REIT | | | 1,402 | | | | 45,397 | |
Healthpeak Properties, Inc. REIT | | | 1,888 | | | | 45,029 | |
Mid-America Apartment Communities, Inc. REIT | | | 435 | | | | 44,818 | |
Cincinnati Financial Corp. | | | 580 | | | | 43,761 | |
Discover Financial Services | | | 1,196 | | | | 42,661 | |
Nasdaq, Inc. | | | 438 | | | | 41,588 | |
UDR, Inc. REIT | | | 1,118 | | | | 40,852 | |
Fifth Third Bancorp | | | 2,707 | | | | 40,199 | |
KeyCorp | | | 3,757 | | | | 38,960 | |
Ventas, Inc. REIT | | | 1,422 | | | | 38,110 | |
Cboe Global Markets, Inc. | | | 423 | | | | 37,753 | |
Synchrony Financial | | | 2,153 | | | | 34,642 | |
Loews Corp. | | | 976 | | | | 33,994 | |
Regions Financial Corp. | | | 3,679 | | | | 33,001 | |
Huntington Bancshares, Inc. | | | 3,939 | | | | 32,339 | |
Citizens Financial Group, Inc. | | | 1,658 | | | | 31,187 | |
Principal Financial Group, Inc. | | | 985 | | | | 30,870 | |
Host Hotels & Resorts, Inc. REIT | | | 2,735 | | | | 30,194 | |
Everest Re Group Ltd. | | | 156 | | | | 30,018 | |
Raymond James Financial, Inc. | | | 471 | | | | 29,767 | |
SVB Financial Group* | | | 197 | | | | 29,763 | |
E*TRADE Financial Corp. | | | 862 | | | | 29,584 | |
Western Union Co. | | | 1,599 | | | | 28,990 | |
WR Berkley Corp. | | | 553 | | | | 28,850 | |
Globe Life, Inc. | | | 380 | | | | 27,349 | |
Iron Mountain, Inc. REIT | | | 1,095 | | | | 26,061 | |
Regency Centers Corp. REIT | | | 639 | | | | 24,557 | |
Assurant, Inc. | | | 231 | | | | 24,045 | |
Vornado Realty Trust REIT | | | 604 | | | | 21,871 | |
Federal Realty Investment Trust REIT | | | 268 | | | | 19,995 | |
Apartment Investment & Management Co. — Class A REIT | | | 568 | | | | 19,965 | |
Lincoln National Corp. | | | 756 | | | | 19,898 | |
People’s United Financial, Inc. | | | 1,694 | | | | 18,719 | |
Franklin Resources, Inc. | | | 1,064 | | | | 17,758 | |
Zions Bancorp North America | | | 650 | | | | 17,394 | |
Comerica, Inc. | | | 550 | | | | 16,137 | |
Kimco Realty Corp. REIT | | | 1,610 | | | | 15,569 | |
SL Green Realty Corp. REIT | | | 311 | | | | 13,404 | |
Invesco Ltd. | | | 1,420 | | | | 12,894 | |
Unum Group | | | 787 | | | | 11,813 | |
Alliance Data Systems Corp. | | | 156 | | | | 5,249 | |
Total Financial | | | | | | | 12,791,530 | |
| | | | | | | | | |
Industrial - 4.9% |
Union Pacific Corp. | | | 2,648 | | | | 373,474 | |
Honeywell International, Inc. | | | 2,725 | | | | 364,578 | |
Lockheed Martin Corp. | | | 947 | | | | 320,986 | |
Boeing Co. | | | 2,039 | | | | 304,096 | |
3M Co. | | | 2,193 | | | | 299,366 | |
United Technologies Corp.* | | | 3,094 | | | | 291,857 | |
General Electric Co. | | | 33,311 | | | | 264,489 | |
United Parcel Service, Inc. — Class B | | | 2,673 | | | | 249,712 | |
Caterpillar, Inc. | | | 2,108 | | | | 244,612 | |
Northrop Grumman Corp. | | | 598 | | | | 180,925 | |
CSX Corp. | | | 2,966 | | | | 169,952 | |
Deere & Co. | | | 1,201 | | | | 165,930 | |
Illinois Tool Works, Inc. | | | 1,116 | | | | 158,606 | |
L3Harris Technologies, Inc. | | | 843 | | | | 151,841 | |
Norfolk Southern Corp. | | | 995 | | | | 145,270 | |
Raytheon Co. | | | 1,062 | | | | 139,281 | |
Waste Management, Inc. | | | 1,489 | | | | 137,822 | |
Roper Technologies, Inc. | | | 397 | | | | 123,789 | |
Eaton Corporation plc | | | 1,577 | | | | 122,517 | |
General Dynamics Corp. | | | 894 | | | | 118,285 | |
FedEx Corp. | | | 916 | | | | 111,074 | |
Emerson Electric Co. | | | 2,323 | | | | 110,691 | |
Agilent Technologies, Inc. | | | 1,180 | | | | 84,512 | |
Amphenol Corp. — Class A | | | 1,131 | | | | 82,427 | |
Ball Corp. | | | 1,248 | | | | 80,696 | |
TE Connectivity Ltd. | | | 1,276 | | | | 80,362 | |
Johnson Controls International plc | | | 2,942 | | | | 79,316 | |
Trane Technologies plc | | | 914 | | | | 75,487 | |
Rockwell Automation, Inc. | | | 441 | | | | 66,551 | |
Mettler-Toledo International, Inc.* | | | 93 | | | | 64,217 | |
Parker-Hannifin Corp. | | | 490 | | | | 63,568 | |
AMETEK, Inc. | | | 872 | | | | 62,801 | |
Fortive Corp. | | | 1,127 | | | | 62,199 | |
TransDigm Group, Inc. | | | 190 | | | | 60,836 | |
Republic Services, Inc. — Class A | | | 803 | | | | 60,273 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
S&P 500® FUND | |
| | Shares | | | Value | |
Keysight Technologies, Inc.* | | | 715 | | | $ | 59,831 | |
Stanley Black & Decker, Inc. | | | 580 | | | | 58,000 | |
Vulcan Materials Co. | | | 505 | | | | 54,575 | |
Amcor plc | | | 6,179 | | | | 50,173 | |
Kansas City Southern | | | 378 | | | | 48,074 | |
Old Dominion Freight Line, Inc. | | | 365 | | | | 47,910 | |
Dover Corp. | | | 554 | | | | 46,503 | |
Martin Marietta Materials, Inc. | | | 238 | | | | 45,037 | |
Waters Corp.* | | | 246 | | | | 44,784 | |
Xylem, Inc. | | | 687 | | | | 44,744 | |
Expeditors International of Washington, Inc. | | | 650 | | | | 43,368 | |
Garmin Ltd. | | | 551 | | | | 41,303 | |
Jacobs Engineering Group, Inc. | | | 517 | | | | 40,983 | |
IDEX Corp. | | | 290 | | | | 40,052 | |
Masco Corp. | | | 1,084 | | | | 37,474 | |
CH Robinson Worldwide, Inc. | | | 516 | | | | 34,159 | |
Westinghouse Air Brake Technologies Corp. | | | 695 | | | | 33,451 | |
Ingersoll Rand, Inc.* | | | 1,320 | | | | 32,736 | |
Allegion plc | | | 354 | | | | 32,575 | |
PerkinElmer, Inc. | | | 424 | | | | 31,919 | |
Packaging Corporation of America | | | 361 | | | | 31,346 | |
J.B. Hunt Transport Services, Inc. | | | 325 | | | | 29,975 | |
Huntington Ingalls Industries, Inc. | | | 156 | | | | 28,425 | |
Westrock Co. | | | 984 | | | | 27,808 | |
Arconic, Inc. | | | 1,477 | | | | 23,721 | |
Textron, Inc. | | | 871 | | | | 23,230 | |
Fortune Brands Home & Security, Inc. | | | 531 | | | | 22,966 | |
Snap-on, Inc. | | | 209 | | | | 22,743 | |
AO Smith Corp. | | | 523 | | | | 19,775 | |
Pentair plc | | | 641 | | | | 19,076 | |
FLIR Systems, Inc. | | | 512 | | | | 16,328 | |
Sealed Air Corp. | | | 589 | | | | 14,554 | |
Flowserve Corp. | | | 499 | | | | 11,921 | |
Total Industrial | | | | | | | 6,631,917 | |
| | | | | | | | | |
Consumer, Cyclical - 4.7% |
Home Depot, Inc. | | | 4,161 | | | | 776,900 | |
Walmart, Inc. | | | 5,411 | | | | 614,798 | |
Costco Wholesale Corp. | | | 1,685 | | | | 480,444 | |
McDonald’s Corp. | | | 2,872 | | | | 474,885 | |
NIKE, Inc. — Class B | | | 4,753 | | | | 393,263 | |
Starbucks Corp. | | | 4,505 | | | | 296,159 | |
Lowe’s Companies, Inc. | | | 2,923 | | | | 251,524 | |
TJX Companies, Inc. | | | 4,625 | | | | 221,121 | |
Target Corp. | | | 1,933 | | | | 179,711 | |
Dollar General Corp. | | | 971 | | | | 146,631 | |
Walgreens Boots Alliance, Inc. | | | 2,860 | | | | 130,845 | |
Ross Stores, Inc. | | | 1,380 | | | | 120,019 | |
General Motors Co. | | | 4,796 | | | | 99,661 | |
O’Reilly Automotive, Inc.* | | | 289 | | | | 87,003 | |
PACCAR, Inc. | | | 1,319 | | | | 80,630 | |
Yum! Brands, Inc. | | | 1,154 | | | | 79,084 | |
Cummins, Inc. | | | 584 | | | | 79,027 | |
Marriott International, Inc. — Class A | | | 1,035 | | | | 77,429 | |
AutoZone, Inc.* | | | 91 | | | | 76,986 | |
Hilton Worldwide Holdings, Inc. | | | 1,076 | | | | 73,426 | |
Ford Motor Co. | | | 14,852 | | | | 71,735 | |
Fastenal Co. | | | 2,188 | | | | 68,375 | |
VF Corp. | | | 1,249 | | | | 67,546 | |
Dollar Tree, Inc.* | | | 903 | | | | 66,343 | |
Southwest Airlines Co. | | | 1,807 | | | | 64,347 | |
Chipotle Mexican Grill, Inc. — Class A* | | | 98 | | | | 64,131 | |
Delta Air Lines, Inc. | | | 2,195 | | | | 62,623 | |
Las Vegas Sands Corp. | | | 1,289 | | | | 54,744 | |
Copart, Inc.* | | | 780 | | | | 53,446 | |
Tiffany & Co. | | | 412 | | | | 53,354 | |
Best Buy Company, Inc. | | | 869 | | | | 49,533 | |
Aptiv plc | | | 974 | | | | 47,960 | |
DR Horton, Inc. | | | 1,279 | | | | 43,486 | |
WW Grainger, Inc. | | | 166 | | | | 41,251 | |
Lennar Corp. — Class A | | | 1,068 | | | | 40,798 | |
Ulta Beauty, Inc.* | | | 218 | | | | 38,303 | |
Tractor Supply Co. | | | 452 | | | | 38,217 | |
Genuine Parts Co. | | | 554 | | | | 37,301 | |
Hasbro, Inc. | | | 485 | | | | 34,702 | |
CarMax, Inc.* | | | 627 | | | | 33,751 | |
NVR, Inc.* | | | 13 | | | | 33,398 | |
United Airlines Holdings, Inc.*,1 | | | 830 | | | | 26,187 | |
Darden Restaurants, Inc. | | | 468 | | | | 25,487 | |
Advance Auto Parts, Inc. | | | 264 | | | | 24,637 | |
Live Nation Entertainment, Inc.* | | | 537 | | | | 24,412 | |
LKQ Corp.* | | | 1,169 | | | | 23,976 | |
MGM Resorts International | | | 1,964 | | | | 23,175 | |
Wynn Resorts Ltd. | | | 369 | | | | 22,210 | |
PulteGroup, Inc. | | | 972 | | | | 21,695 | |
Royal Caribbean Cruises Ltd. | | | 656 | | | | 21,103 | |
Whirlpool Corp. | | | 241 | | | | 20,678 | |
Carnival Corp. | | | 1,528 | | | | 20,124 | |
Newell Brands, Inc. | | | 1,453 | | | | 19,296 | |
BorgWarner, Inc. | | | 788 | | | | 19,203 | |
American Airlines Group, Inc.1 | | | 1,487 | | | | 18,127 | |
Mohawk Industries, Inc.* | | | 227 | | | | 17,306 | |
Tapestry, Inc. | | | 1,052 | | | | 13,623 | |
Leggett & Platt, Inc. | | | 502 | | | | 13,393 | |
Alaska Air Group, Inc. | | | 470 | | | | 13,381 | |
Ralph Lauren Corp. — Class A | | | 190 | | | | 12,698 | |
Harley-Davidson, Inc. | | | 588 | | | | 11,131 | |
Hanesbrands, Inc. | | | 1,380 | | | | 10,860 | |
PVH Corp. | | | 283 | | | | 10,652 | |
L Brands, Inc. | | | 886 | | | | 10,242 | |
Norwegian Cruise Line Holdings Ltd.* | | | 811 | | | | 8,889 | |
Kohl’s Corp. | | | 597 | | | | 8,710 | |
Under Armour, Inc. — Class A* | | | 718 | | | | 6,613 | |
Nordstrom, Inc.1 | | | 409 | | | | 6,274 | |
Capri Holdings Ltd.* | | | 578 | | | | 6,237 | |
Under Armour, Inc. — Class C* | | | 742 | | | | 5,980 | |
Macy’s, Inc.1 | | | 1,179 | | | | 5,789 | |
Gap, Inc. | | | 812 | | | | 5,717 | |
Total Consumer, Cyclical | | | | | | | 6,282,695 | |
| | | | | | | | | |
Utilities - 2.1% |
NextEra Energy, Inc. | | | 1,864 | | | | 448,516 | |
Dominion Energy, Inc. | | | 3,139 | | | | 226,605 | |
Duke Energy Corp. | | | 2,781 | | | | 224,927 | |
Southern Co. | | | 4,000 | | | | 216,560 | |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
S&P 500® FUND | |
| | Shares | | | Value | |
American Electric Power Company, Inc. | | | 1,884 | | | $ | 150,682 | |
Exelon Corp. | | | 3,708 | | | | 136,492 | |
Sempra Energy | | | 1,075 | | | | 121,464 | |
Xcel Energy, Inc. | | | 2,000 | | | | 120,600 | |
WEC Energy Group, Inc. | | | 1,203 | | | | 106,020 | |
Consolidated Edison, Inc. | | | 1,268 | | | | 98,904 | |
Eversource Energy | | | 1,235 | | | | 96,589 | |
Public Service Enterprise Group, Inc. | | | 1,929 | | | | 86,631 | |
FirstEnergy Corp. | | | 2,061 | | | | 82,584 | |
American Water Works Company, Inc. | | | 690 | | | | 82,496 | |
Edison International | | | 1,368 | | | | 74,953 | |
PPL Corp. | | | 2,929 | | | | 72,288 | |
Entergy Corp. | | | 759 | | | | 71,323 | |
DTE Energy Co. | | | 733 | | | | 69,613 | |
Ameren Corp. | | | 938 | | | | 68,315 | |
CMS Energy Corp. | | | 1,083 | | | | 63,626 | |
Evergy, Inc. | | | 869 | | | | 47,839 | |
Atmos Energy Corp. | | | 455 | | | | 45,150 | |
Alliant Energy Corp. | | | 917 | | | | 44,282 | |
NiSource, Inc. | | | 1,425 | | | | 35,582 | |
AES Corp. | | | 2,532 | | | | 34,435 | |
Pinnacle West Capital Corp. | | | 429 | | | | 32,514 | |
CenterPoint Energy, Inc. | | | 1,916 | | | | 29,602 | |
NRG Energy, Inc. | | | 960 | | | | 26,170 | |
Total Utilities | | | | | | | 2,914,762 | |
| | | | | | | | | |
Energy - 1.6% |
Exxon Mobil Corp. | | | 16,138 | | | | 612,760 | |
Chevron Corp. | | | 7,212 | | | | 522,581 | |
ConocoPhillips | | | 4,185 | | | | 128,898 | |
Kinder Morgan, Inc. | | | 7,429 | | | | 103,412 | |
Phillips 66 | | | 1,695 | | | | 90,937 | |
EOG Resources, Inc. | | | 2,219 | | | | 79,706 | |
Schlumberger Ltd. | | | 5,280 | | | | 71,227 | |
Valero Energy Corp. | | | 1,566 | | | | 71,034 | |
Williams Companies, Inc. | | | 4,623 | | | | 65,415 | |
Marathon Petroleum Corp. | | | 2,477 | | | | 58,507 | |
Pioneer Natural Resources Co. | | | 632 | | | | 44,335 | |
Occidental Petroleum Corp. | | | 3,407 | | | | 39,453 | |
ONEOK, Inc. | | | 1,576 | | | | 34,373 | |
Hess Corp. | | | 988 | | | | 32,900 | |
Concho Resources, Inc. | | | 767 | | | | 32,866 | |
Cabot Oil & Gas Corp. — Class A | | | 1,556 | | | | 26,748 | |
Baker Hughes Co. | | | 2,479 | | | | 26,029 | |
Halliburton Co. | | | 3,348 | | | | 22,934 | |
Diamondback Energy, Inc. | | | 615 | | | | 16,113 | |
National Oilwell Varco, Inc. | | | 1,472 | | | | 14,470 | |
HollyFrontier Corp. | | | 566 | | | | 13,873 | |
Noble Energy, Inc. | | | 1,824 | | | | 11,017 | |
TechnipFMC plc | | | 1,603 | | | | 10,804 | |
Devon Energy Corp. | | | 1,476 | | | | 10,199 | |
Marathon Oil Corp. | | | 3,051 | | | | 10,038 | |
Helmerich & Payne, Inc. | | | 414 | | | | 6,479 | |
Apache Corp. | | | 1,434 | | | | 5,994 | |
Total Energy | | | | | | | 2,163,102 | |
| | | | | | | | | |
Basic Materials - 1.2% |
Linde plc | | | 2,049 | | | | 354,477 | |
Air Products & Chemicals, Inc. | | | 841 | | | | 167,872 | |
Ecolab, Inc. | | | 956 | | | | 148,973 | |
Sherwin-Williams Co. | | | 313 | | | | 143,830 | |
Newmont Corp. | | | 3,127 | | | | 141,591 | |
DuPont de Nemours, Inc. | | | 2,826 | | | | 96,367 | |
Dow, Inc. | | | 2,828 | | | | 82,691 | |
PPG Industries, Inc. | | | 902 | | | | 75,407 | |
LyondellBasell Industries N.V. — Class A | | | 979 | | | | 48,588 | |
International Paper Co. | | | 1,496 | | | | 46,571 | |
Nucor Corp. | | | 1,157 | | | | 41,675 | |
International Flavors & Fragrances, Inc.1 | | | 407 | | | | 41,546 | |
FMC Corp. | | | 494 | | | | 40,355 | |
Freeport-McMoRan, Inc. | | | 5,534 | | | | 37,354 | |
Celanese Corp. — Class A | | | 461 | | | | 33,833 | |
Eastman Chemical Co. | | | 519 | | | | 24,175 | |
Albemarle Corp. | | | 404 | | | | 22,773 | |
CF Industries Holdings, Inc. | | | 829 | | | | 22,549 | |
Mosaic Co. | | | 1,334 | | | | 14,434 | |
Total Basic Materials | | | | | | | 1,585,061 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $72,195,554) | | | | | | | 81,715,264 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY DISCOUNT NOTES†† - 4.8% |
Federal Home Loan Bank |
0.05% due 04/03/202 | | $ | 5,000,000 | | | | 4,999,986 | |
Freddie Mac |
0.08% due 04/07/202 | | | 1,400,000 | | | | 1,399,981 | |
Total Federal Agency Discount Notes | | | | |
(Cost $6,399,967) | | | | | | | 6,399,967 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,3 - 20.1% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/204 | | | 19,561,769 | | | | 19,561,769 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/204 | | | 7,523,758 | | | | 7,523,758 | |
Total Repurchase Agreements | | | | |
(Cost $27,085,527) | | | | | | | 27,085,527 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
S&P 500® FUND | |
| | Shares | | | Value | |
SECURITIES LENDING COLLATERAL†,5 - 0.0% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%6 | | | 41,327 | | | $ | 41,327 | |
Total Securities Lending Collateral | | | | |
(Cost $41,327) | | | | | | | 41,327 | |
| | | | | | | | | |
Total Investments - 85.6% | | | | |
(Cost $105,722,375) | | $ | 115,242,085 | |
Other Assets & Liabilities, net - 14.4% | | | 19,336,374 | |
Total Net Assets - 100.0% | | $ | 134,578,459 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
S&P 500 Index Mini Futures Contracts | | | 115 | | | | Jun 2020 | | | $ | 14,791,875 | | | $ | 794,086 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Depreciation | |
OTC Equity Index Swap Agreements†† |
Barclays Bank plc | S&P 500 Index | 1.04% (1 Week USD LIBOR + 0.45%) | At Maturity | | | 04/30/20 | | | | 137 | | | $ | 353,155 | | | $ | (5,747 | ) |
BNP Paribas | S&P 500 Index | 1.54% (1 Month USD LIBOR + 0.55%) | At Maturity | | | 04/29/20 | | | | 2,676 | | | | 6,916,386 | | | | (121,706 | ) |
Goldman Sachs International | S&P 500 Index | 1.04% (1 Week USD LIBOR + 0.45%) | At Maturity | | | 04/28/20 | | | | 12,016 | | | | 31,057,194 | | | | (511,754 | ) |
| | | | | | | | | | | | | | $ | 38,326,735 | | | $ | (639,207 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
5 | Securities lending collateral — See Note 7. |
6 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
S&P 500® FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 81,715,264 | | | $ | — | | | $ | — | | | $ | 81,715,264 | |
Federal Agency Discount Notes | | | — | | | | 6,399,967 | | | | — | | | | 6,399,967 | |
Repurchase Agreements | | | — | | | | 27,085,527 | | | | — | | | | 27,085,527 | |
Securities Lending Collateral | | | 41,327 | | | | — | | | | — | | | | 41,327 | |
Equity Futures Contracts** | | | 794,086 | | | | — | | | | — | | | | 794,086 | |
Total Assets | | $ | 82,550,677 | | | $ | 33,485,494 | | | $ | — | | | $ | 116,036,171 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 639,207 | | | $ | — | | | $ | 639,207 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $39,302 of securities loaned (cost $78,636,848) | | $ | 88,156,558 | |
Repurchase agreements, at value (cost $27,085,527) | | | 27,085,527 | |
Cash | | | 17,097,437 | |
Segregated cash with broker | | | 1,400,002 | |
Receivables: |
Fund shares sold | | | 3,927,102 | |
Dividends | | | 71,769 | |
Securities lending income | | | 305 | |
Interest | | | 5 | |
Total assets | | | 137,738,705 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 639,207 | |
Payable for: |
Fund shares redeemed | | | 1,938,839 | |
Variation margin on futures contracts | | | 168,363 | |
Swap settlement | | | 85,150 | |
Management fees | | | 65,462 | |
Return of securities lending collateral | | | 41,327 | |
Transfer agent and administrative fees | | | 28,274 | |
Distribution and service fees | | | 28,149 | |
Portfolio accounting fees | | | 13,093 | |
Trustees’ fees | | | 2,270 | |
Miscellaneous | | | 150,112 | |
Total liabilities | | | 3,160,246 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 134,578,459 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 124,348,281 | |
Total distributable earnings (loss) | | | 10,230,178 | |
Net assets | | $ | 134,578,459 | |
| | | | | |
A-Class: |
Net assets | | $ | 12,798,146 | |
Capital shares outstanding | | | 274,422 | |
Net asset value per share | | $ | 46.64 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 48.97 | |
| | | | | |
C-Class: |
Net assets | | $ | 8,980,844 | |
Capital shares outstanding | | | 217,096 | |
Net asset value per share | | $ | 41.37 | |
| | | | | |
H-Class: |
Net assets | | $ | 112,799,469 | |
Capital shares outstanding | | | 2,418,752 | |
Net asset value per share | | $ | 46.64 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1) | | $ | 2,564,825 | |
Interest | | | 424,589 | |
Income from securities lending, net | | | 1,147 | |
Total investment income | | | 2,990,561 | |
| | | | | |
Expenses: |
Management fees | | | 1,145,919 | |
Distribution and service fees: |
A-Class | | | 50,380 | |
C-Class | | | 160,875 | |
H-Class | | | 291,380 | |
Transfer agent and administrative fees | | | 388,428 | |
Portfolio accounting fees | | | 229,188 | |
Professional fees | | | 69,593 | |
Trustees’ fees* | | | 34,907 | |
Custodian fees | | | 21,887 | |
Miscellaneous | | | 294,091 | |
Total expenses | | | 2,686,648 | |
Net investment income | | | 303,913 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 17,511,620 | |
Swap agreements | | | 8,449,493 | |
Futures contracts | | | 2,570,395 | |
Net realized gain | | | 28,531,508 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (30,762,284 | ) |
Swap agreements | | | (828,327 | ) |
Futures contracts | | | 793,965 | |
Net change in unrealized appreciation (depreciation) | | | (30,796,646 | ) |
Net realized and unrealized loss | | | (2,265,138 | ) |
Net decrease in net assets resulting from operations | | $ | (1,961,225 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 303,913 | | | $ | 469,575 | |
Net realized gain on investments | | | 28,531,508 | | | | 597,688 | |
Net change in unrealized appreciation (depreciation) on investments | | | (30,796,646 | ) | | | 1,645,818 | |
Net increase (decrease) in net assets resulting from operations | | | (1,961,225 | ) | | | 2,713,081 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (170,248 | ) | | | (321,942 | ) |
C-Class | | | (224,547 | ) | | | (227,483 | ) |
H-Class | | | (1,236,817 | ) | | | (2,546,090 | ) |
Total distributions to shareholders | | | (1,631,612 | ) | | | (3,095,515 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 87,906,591 | | | | 93,539,104 | |
C-Class | | | 29,691,610 | | | | 72,975,867 | |
H-Class | | | 769,142,083 | | | | 981,240,477 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 161,590 | | | | 291,602 | |
C-Class | | | 215,561 | | | | 213,467 | |
H-Class | | | 1,225,304 | | | | 2,531,231 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (95,911,253 | ) | | | (94,083,958 | ) |
C-Class | | | (34,726,021 | ) | | | (79,616,540 | ) |
H-Class | | | (774,454,754 | ) | | | (1,041,846,099 | ) |
Net decrease from capital share transactions | | | (16,749,289 | ) | | | (64,754,849 | ) |
Net decrease in net assets | | | (20,342,126 | ) | | | (65,137,283 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 154,920,585 | | | | 220,057,868 | |
End of year | | $ | 134,578,459 | | | $ | 154,920,585 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 1,691,515 | | | | 1,850,237 | |
C-Class | | | 615,341 | | | | 1,601,634 | |
H-Class | | | 14,338,970 | | | | 19,539,683 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 2,804 | | | | 6,304 | |
C-Class | | | 4,209 | | | | 5,146 | |
H-Class | | | 21,273 | | | | 54,729 | |
Shares redeemed | | | | | | | | |
A-Class | | | (1,813,839 | ) | | | (1,894,508 | ) |
C-Class | | | (718,973 | ) | | | (1,755,858 | ) |
H-Class | | | (14,269,930 | ) | | | (20,931,485 | ) |
Net decrease in shares | | | (128,630 | ) | | | (1,524,118 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 51.55 | | | $ | 48.72 | | | $ | 45.52 | | | $ | 39.85 | | | $ | 41.40 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .17 | | | | .15 | | | | .13 | | | | .06 | | | | .03 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.54 | ) | | | 3.45 | | | | 5.44 | | | | 5.97 | | | | — | |
Total from investment operations | | | (4.37 | ) | | | 3.60 | | | | 5.57 | | | | 6.03 | | | | .03 | |
Less distributions from: |
Net investment income | | | (.12 | ) | | | (.05 | ) | | | (.12 | ) | | | (.05 | ) | | | (.01 | ) |
Net realized gains | | | (.42 | ) | | | (.72 | ) | | | (2.25 | ) | | | (.31 | ) | | | (1.57 | ) |
Total distributions | | | (.54 | ) | | | (.77 | ) | | | (2.37 | ) | | | (.36 | ) | | | (1.58 | ) |
Net asset value, end of period | | $ | 46.64 | | | $ | 51.55 | | | $ | 48.72 | | | $ | 45.52 | | | $ | 39.85 | |
|
Total Returnb | | | (8.67 | %) | | | 7.59 | % | | | 12.16 | % | | | 15.17 | % | | | 0.08 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 12,798 | | | $ | 20,307 | | | $ | 21,041 | | | $ | 20,960 | | | $ | 39,793 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.31 | % | | | 0.30 | % | | | 0.27 | % | | | 0.14 | % | | | 0.02 | % |
Total expenses | | | 1.68 | % | | | 1.67 | % | | | 1.58 | % | | | 1.57 | % | | | 1.55 | % |
Portfolio turnover rate | | | 227 | % | | | 157 | % | | | 151 | % | | | 133 | % | | | 181 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 46.12 | | | $ | 44.00 | | | $ | 41.62 | | | $ | 36.74 | | | $ | 38.58 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.24 | ) | | | (.20 | ) | | | (.19 | ) | | | (.22 | ) | | | (.26 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (3.97 | ) | | | 3.09 | | | | 4.94 | | | | 5.46 | | | | — | |
Total from investment operations | | | (4.21 | ) | | | 2.89 | | | | 4.75 | | | | 5.24 | | | | (.26 | ) |
Less distributions from: |
Net investment income | | | (.12 | ) | | | (.05 | ) | | | (.12 | ) | | | (.05 | ) | | | (.01 | ) |
Net realized gains | | | (.42 | ) | | | (.72 | ) | | | (2.25 | ) | | | (.31 | ) | | | (1.57 | ) |
Total distributions | | | (.54 | ) | | | (.77 | ) | | | (2.37 | ) | | | (.36 | ) | | | (1.58 | ) |
Net asset value, end of period | | $ | 41.37 | | | $ | 46.12 | | | $ | 44.00 | | | $ | 41.62 | | | $ | 36.74 | |
|
Total Returnb | | | (9.35 | %) | | | 6.78 | % | | | 11.29 | % | | | 14.33 | % | | | (0.67 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 8,981 | | | $ | 14,599 | | | $ | 20,484 | | | $ | 20,931 | | | $ | 15,667 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.50 | %) | | | (0.45 | %) | | | (0.44 | %) | | | (0.57 | %) | | | (0.70 | %) |
Total expenses | | | 2.43 | % | | | 2.41 | % | | | 2.33 | % | | | 2.33 | % | | | 2.31 | % |
Portfolio turnover rate | | | 227 | % | | | 157 | % | | | 151 | % | | | 133 | % | | | 181 | % |
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 51.54 | | | $ | 48.71 | | | $ | 45.51 | | | $ | 39.84 | | | $ | 41.40 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .15 | | | | .16 | | | | .15 | | | | .07 | | | | .03 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.51 | ) | | | 3.44 | | | | 5.42 | | | | 5.96 | | | | (.01 | ) |
Total from investment operations | | | (4.36 | ) | | | 3.60 | | | | 5.57 | | | | 6.03 | | | | .02 | |
Less distributions from: |
Net investment income | | | (.12 | ) | | | (.05 | ) | | | (.12 | ) | | | (.05 | ) | | | (.01 | ) |
Net realized gains | | | (.42 | ) | | | (.72 | ) | | | (2.25 | ) | | | (.31 | ) | | | (1.57 | ) |
Total distributions | | | (.54 | ) | | | (.77 | ) | | | (2.37 | ) | | | (.36 | ) | | | (1.58 | ) |
Net asset value, end of period | | $ | 46.64 | | | $ | 51.54 | | | $ | 48.71 | | | $ | 45.51 | | | $ | 39.84 | |
|
Total Return | | | (8.65 | %) | | | 7.59 | % | | | 12.14 | % | | | 15.20 | % | | | 0.06 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 112,799 | | | $ | 120,014 | | | $ | 178,533 | | | $ | 226,744 | | | $ | 229,420 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.28 | % | | | 0.32 | % | | | 0.31 | % | | | 0.16 | % | | | 0.07 | % |
Total expenses | | | 1.68 | % | | | 1.66 | % | | | 1.58 | % | | | 1.58 | % | | | 1.55 | % |
Portfolio turnover rate | | | 227 | % | | | 157 | % | | | 151 | % | | | 133 | % | | | 181 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INVERSE S&P 500® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Inverse S&P 500® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the S&P 500 Index.
Inverse S&P 500® Strategy Fund Investor Class returned 1.10%, while the S&P 500 Index returned -6.98% over the same time period.
The only sector contributing to the return of the underlying index was Information Technology. The sectors detracting the most were Energy, Financials, and Industrials.
The holdings contributing the most to the return of the underlying index were Microsoft Corp., Apple, Inc., and Amazon.com, Inc. The holdings detracting the most were ExxonMobil Corp., Boeing Co., and Chevron Corp.
Derivatives in the Fund were used to help provide inverse exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
40 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
Investor Class | January 7, 1994 |
A-Class | March 31, 2004 |
C-Class | March 15, 2001 |
H-Class | September 18, 2014 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Cumulative Fund Performance*
Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund II | 6.3% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 4.0% |
Total | 10.3% |
| | |
“ Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | 1.10% | (8.10%) | (12.01%) |
A-Class Shares | 0.85% | (8.32%) | (12.23%) |
A-Class Shares with sales charge‡ | (3.94%) | (9.21%) | (12.65%) |
C-Class Shares | 0.09% | (9.03%) | (12.89%) |
C-Class Shares with CDSC§ | (0.90%) | (9.03%) | (12.89%) |
S&P 500 Index | (6.98%) | 6.73% | 10.53% |
| 1 Year | 5 Year | Since
Inception
(09/18/14) |
H-Class Shares | 0.85% | (8.33%) | (8.46%) |
S&P 500 Index | (6.98%) | 6.73% | 6.80% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 41 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE S&P 500® STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 10.3% |
Guggenheim Strategy Fund II1 | | | 282,633 | | | $ | 6,797,326 | |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 445,810 | | | | 4,355,562 | |
Total Mutual Funds | | | | |
(Cost $11,430,892) | | | | | | | 11,152,888 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 33.7% |
Federal Farm Credit Bank |
1.53% (3 Month USD LIBOR - 0.21%, Rate Floor: 0.00%) due 08/10/202 | | $ | 5,000,000 | | | | 4,997,587 | |
0.38% (3 Month U.S. Treasury Bill Rate + 0.29%, Rate Floor: 0.00%) due 04/11/222 | | | 5,000,000 | | | | 4,991,819 | |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | | | 4,500,000 | | | | 4,509,920 | |
0.44% (U.S. Prime Rate - 2.81%, Rate Floor: 0.00%) due 05/20/222 | | | 3,040,000 | | | | 3,046,604 | |
Fannie Mae |
0.09% (U.S. Secured Overnight Financing Rate + 0.08%, Rate Floor: 0.00%) due 09/16/202 | | | 5,000,000 | | | | 4,999,534 | |
0.23% (U.S. Secured Overnight Financing Rate + 0.22%, Rate Floor: 0.00%) due 03/16/222 | | | 5,000,000 | | | | 4,990,095 | |
1.88% due 12/28/20 | | | 2,500,000 | | | | 2,527,021 | |
Freddie Mac |
0.01% (U.S. Secured Overnight Financing Rate, Rate Floor: 0.00%) due 04/13/202 | | | 5,000,000 | | | | 4,999,882 | |
Federal Home Loan Bank |
1.38% due 09/28/20 | | | 1,600,000 | | | | 1,608,670 | |
Total Federal Agency Notes | | | | |
(Cost $36,675,490) | | | | | | | 36,671,132 | |
| | | | | | | | | |
| FEDERAL AGENCY DISCOUNT NOTES††- 29.7% |
| Federal Home Loan Bank |
0.40% due 05/08/203 | | | 9,000,000 | | | | 8,996,300 | |
0.30% due 05/29/203 | | | 5,400,000 | | | | 5,399,391 | |
0.51% due 08/03/203 | | | 5,000,000 | | | | 4,998,106 | |
0.40% due 05/20/203 | | | 1,000,000 | | | | 999,904 | |
0.05% due 04/08/203 | | | 5,000,000 | | | | 4,999,951 | |
0.30% due 05/04/203 | | | 1,950,000 | | | | 1,949,464 | |
0.05% due 04/01/203 | | | 1,235,000 | | | | 1,235,000 | |
0.30% due 05/01/203 | | | 680,000 | | | | 679,830 | |
| Fannie Mae |
0.05% due 04/13/203 | | | 3,000,000 | | | | 2,999,950 | |
| Total Federal Agency Discount Notes | | | | | | | | |
| (Cost $32,248,385) | | | | | | | 32,257,896 | |
| | | | | | | | | |
| U.S. TREASURY BILLS††- 0.1% |
| U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 135,000 | | | | 134,994 | |
| Total U.S. Treasury Bills | | | | | | | | |
| (Cost $134,945) | | | | | | | 134,994 | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS††,5- 12.6% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | | 9,866,912 | | | | 9,866,912 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 3,794,966 | | | | 3,794,966 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $13,661,878) | | | | | | | 13,661,878 | |
| | | | | | | | | |
| Total Investments - 86.4% | | | | | | | | |
| (Cost $94,151,590) | | | | | | $ | 93,878,788 | |
| Other Assets & Liabilities, net - 13.6% | | | | | | | 14,801,056 | |
| Total Net Assets - 100.0% | | | | | | $ | 108,679,844 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Depreciation** | |
Equity Futures Contracts Sold Short† |
S&P 500 Index Mini Futures Contracts | | | 87 | | | | Jun 2020 | | | $ | 11,190,375 | | | $ | (879,553 | ) |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE S&P 500® STRATEGY FUND | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Receive | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation | |
OTC Equity Index Swap Agreements Sold Short†† |
BNP Paribas | S&P 500 Index | (1.04)% (1 Month USD LIBOR + 0.05%) | At Maturity | | | 04/29/20 | | | | 25,324 | | | $ | 65,450,987 | | | $ | 1,046,820 | |
Barclays Bank plc | S&P 500 Index | (0.89)% (1 Week USD LIBOR + 0.30%) | At Maturity | | | 04/30/20 | | | | 7,526 | | | | 19,450,431 | | | | 316,524 | |
Goldman Sachs International | S&P 500 Index | (0.94)% (1 Week USD LIBOR + 0.35%) | At Maturity | | | 04/28/20 | | | | 3,378 | | | | 8,729,591 | | | | 5,607 | |
| | | | | | | | | | | | | | $ | 93,631,009 | | | $ | 1,368,951 | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 11,152,888 | | | $ | — | | | $ | — | | | $ | 11,152,888 | |
Federal Agency Notes | | | — | | | | 36,671,132 | | | | — | | | | 36,671,132 | |
Federal Agency Discount Notes | | | — | | | | 32,257,896 | | | | — | | | | 32,257,896 | |
U.S. Treasury Bills | | | — | | | | 134,994 | | | | — | | | | 134,994 | |
Repurchase Agreements | | | — | | | | 13,661,878 | | | | — | | | | 13,661,878 | |
Equity Index Swap Agreements** | | | — | | | | 1,368,951 | | | | — | | | | 1,368,951 | |
Total Assets | | $ | 11,152,888 | | | $ | 84,094,851 | | | $ | — | | | $ | 95,247,739 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Futures Contracts** | | $ | 879,553 | | | $ | — | | | $ | — | | | $ | 879,553 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INVERSE S&P 500® STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 7,512,127 | | | $ | — | | | $ | (500,001 | ) | | $ | 202 | | | $ | (215,002 | ) | | $ | 6,797,326 | | | | 282,633 | | | $ | 196,500 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 5,195,477 | | | | — | | | | (750,000 | ) | | | 2,888 | | | | (92,803 | ) | | | 4,355,562 | | | | 445,810 | | | | 118,901 | |
| | | $ | 12,707,604 | | | | — | | | $ | (1,250,001 | ) | | $ | 3,090 | | | $ | (307,805 | ) | | $ | 11,152,888 | | | | | | | $ | 315,401 | |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $69,058,820) | | $ | 69,064,022 | |
Investments in affiliated issuers, at value (cost $11,430,892) | | | 11,152,888 | |
Repurchase agreements, at value (cost $13,661,878) | | | 13,661,878 | |
Cash | | | 7,754,064 | |
Segregated cash with broker | | | 1,829,680 | |
Unrealized appreciation on OTC swap agreements | | | 1,368,951 | |
Receivables: |
Fund shares sold | | | 4,386,310 | |
Variation margin on futures contracts | | | 168,345 | |
Interest | | | 60,103 | |
Dividends | | | 21,018 | |
Total assets | | | 109,467,259 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 517,001 | |
Management fees | | | 69,632 | |
Swap settlement | | | 29,546 | |
Transfer agent and administrative fees | | | 22,608 | |
Portfolio accounting fees | | | 7,837 | |
Distribution and service fees | | | 7,052 | |
Trustees’ fees | | | 2,033 | |
Miscellaneous | | | 131,706 | |
Total liabilities | | | 787,415 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 108,679,844 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 317,798,500 | |
Total distributable earnings (loss) | | | (209,118,656 | ) |
Net assets | | $ | 108,679,844 | |
| | | | | |
Investor Class: |
Net assets | | $ | 85,838,939 | |
Capital shares outstanding | | | 1,507,970 | |
Net asset value per share | | $ | 56.92 | |
| | | | | |
A-Class: |
Net assets | | $ | 7,574,827 | |
Capital shares outstanding | | | 144,752 | |
Net asset value per share | | $ | 52.33 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 54.94 | |
| | | | | |
C-Class: |
Net assets | | $ | 6,376,098 | |
Capital shares outstanding | | | 137,158 | |
Net asset value per share | | $ | 46.49 | |
| | | | | |
H-Class: |
Net assets | | $ | 8,889,980 | |
Capital shares outstanding | | | 169,904 | |
Net asset value per share | | $ | 52.32 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 315,401 | |
Interest | | | 962,227 | |
Total investment income | | | 1,277,628 | |
| | | | | |
Expenses: |
Management fees | | | 548,219 | |
Distribution and service fees: |
A-Class | | | 15,668 | |
C-Class | | | 26,932 | |
H-Class | | | 14,964 | |
Transfer agent and administrative fees | | | 155,299 | |
Portfolio accounting fees | | | 60,913 | |
Registration fees | | | 57,687 | |
Professional fees | | | 34,040 | |
Trustees’ fees* | | | 15,275 | |
Custodian fees | | | 8,719 | |
Prime broker interest expense | | | 48 | |
Line of credit fees | | | 4 | |
Miscellaneous | | | 51,391 | |
Total expenses | | | 989,159 | |
Less: |
Expenses waived by Adviser | | | (12,139 | ) |
Net expenses | | | 977,020 | |
Net investment income | | | 300,608 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 36,088 | |
Investments in affiliated issuers | | | 3,090 | |
Swap agreements | | | (3,203,897 | ) |
Futures contracts | | | (1,057,030 | ) |
Net realized loss | | | (4,221,749 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (311 | ) |
Investments in affiliated issuers | | | (307,805 | ) |
Swap agreements | | | 1,957,709 | |
Futures contracts | | | (862,410 | ) |
Net change in unrealized appreciation (depreciation) | | | 787,183 | |
Net realized and unrealized loss | | | (3,434,566 | ) |
Net decrease in net assets resulting from operations | | $ | (3,133,958 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
INVERSE S&P 500® STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 300,608 | | | $ | 481,630 | |
Net realized loss on investments | | | (4,221,749 | ) | | | (7,446,581 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | 787,183 | | | | (225,606 | ) |
Net decrease in net assets resulting from operations | | | (3,133,958 | ) | | | (7,190,557 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (404,392 | ) | | | — | |
A-Class | | | (30,961 | ) | | | — | |
C-Class | | | (17,735 | ) | | | — | |
H-Class | | | (31,456 | ) | | | — | |
Total distributions to shareholders | | | (484,544 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 191,676,284 | | | | 208,817,447 | |
A-Class | | | 32,213,820 | | | | 9,058,886 | |
C-Class | | | 14,599,836 | | | | 35,343,563 | |
H-Class | | | 55,422,179 | | | | 70,374,514 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 392,366 | | | | — | |
A-Class | | | 30,236 | | | | — | |
C-Class | | | 17,213 | | | | — | |
H-Class | | | 30,608 | | | | — | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (150,547,290 | ) | | | (214,934,455 | ) |
A-Class | | | (27,995,128 | ) | | | (10,101,675 | ) |
C-Class | | | (10,836,227 | ) | | | (36,594,092 | ) |
H-Class | | | (51,569,418 | ) | | | (66,764,405 | ) |
Net increase (decrease) from capital share transactions | | | 53,434,479 | | | | (4,800,217 | ) |
Net increase (decrease) in net assets | | | 49,815,977 | | | | (11,990,774 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 58,863,867 | | | | 70,854,641 | |
End of year | | $ | 108,679,844 | | | $ | 58,863,867 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 3,369,987 | | | | 3,461,135 | |
A-Class | | | 638,191 | | | | 164,505 | |
C-Class | | | 327,353 | | | | 716,652 | |
H-Class | | | 1,099,080 | | | | 1,250,985 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 7,737 | | | | — | |
A-Class | | | 648 | | | | — | |
C-Class | | | 414 | | | | — | |
H-Class | | | 656 | | | | — | |
Shares redeemed | | | | | | | | |
Investor Class | | | (2,681,827 | ) | | | (3,577,537 | ) |
A-Class | | | (557,215 | ) | | | (182,576 | ) |
C-Class | | | (247,750 | ) | | | (741,017 | ) |
H-Class | | | (1,059,178 | ) | | | (1,203,450 | ) |
Net increase (decrease) in shares | | | 898,096 | | | | (111,303 | ) |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 56.77 | | | $ | 61.76 | | | $ | 70.35 | | | $ | 83.09 | | | $ | 87.54 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .31 | | | | .46 | | | | (.07 | ) | | | (.55 | ) | | | (.78 | ) |
Net gain (loss) on investments (realized and unrealized) | | | .26 | | | | (5.45 | ) | | | (8.52 | ) | | | (12.19 | ) | | | (3.67 | ) |
Total from investment operations | | | .57 | | | | (4.99 | ) | | | (8.59 | ) | | | (12.74 | ) | | | (4.45 | ) |
Less distributions from: |
Net investment income | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 56.92 | | | $ | 56.77 | | | $ | 61.76 | | | $ | 70.35 | | | $ | 83.09 | |
|
Total Return | | | 1.10 | % | | | (8.08 | %) | | | (12.21 | %) | | | (15.34 | %) | | | (5.07 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 85,839 | | | $ | 46,105 | | | $ | 57,342 | | | $ | 76,404 | | | $ | 153,544 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.58 | % | | | 0.78 | % | | | (0.10 | %) | | | (0.70 | %) | | | (0.91 | %) |
Total expensesb | | | 1.53 | % | | | 1.52 | % | | | 1.43 | % | | | 1.42 | % | | | 1.41 | % |
Net expensesc | | | 1.51 | % | | | 1.51 | % | | | 1.43 | % | | | 1.42 | % | | | 1.41 | % |
Portfolio turnover rate | | | — | | | | — | | | | 56 | % | | | 114 | % | | | 63 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 52.36 | | | $ | 57.11 | | | $ | 65.22 | | | $ | 77.21 | | | $ | 81.54 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .21 | | | | .27 | | | | (.22 | ) | | | (.70 | ) | | | (.96 | ) |
Net gain (loss) on investments (realized and unrealized) | | | .18 | | | | (5.02 | ) | | | (7.89 | ) | | | (11.29 | ) | | | (3.37 | ) |
Total from investment operations | | | .39 | | | | (4.75 | ) | | | (8.11 | ) | | | (11.99 | ) | | | (4.33 | ) |
Less distributions from: |
Net investment income | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 52.33 | | | $ | 52.36 | | | $ | 57.11 | | | $ | 65.22 | | | $ | 77.21 | |
|
Total Returnd | | | 0.85 | % | | | (8.32 | %) | | | (12.43 | %) | | | (15.54 | %) | | | (5.30 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 7,575 | | | $ | 3,306 | | | $ | 4,637 | | | $ | 6,331 | | | $ | 9,256 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.43 | % | | | 0.50 | % | | | (0.37 | %) | | | (0.96 | %) | | | (1.18 | %) |
Total expensesb | | | 1.78 | % | | | 1.76 | % | | | 1.68 | % | | | 1.67 | % | | | 1.66 | % |
Net expensesc | | | 1.76 | % | | | 1.76 | % | | | 1.68 | % | | | 1.67 | % | | | 1.66 | % |
Portfolio turnover rate | | | — | | | | — | | | | 56 | % | | | 114 | % | | | 63 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
INVERSE S&P 500® STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 46.92 | | | $ | 51.56 | | | $ | 59.34 | | | $ | 70.79 | | | $ | 75.34 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.22 | ) | | | (.13 | ) | | | (.63 | ) | | | (1.12 | ) | | | (1.44 | ) |
Net gain (loss) on investments (realized and unrealized) | | | .21 | | | | (4.51 | ) | | | (7.15 | ) | | | (10.33 | ) | | | (3.11 | ) |
Total from investment operations | | | (.01 | ) | | | (4.64 | ) | | | (7.78 | ) | | | (11.45 | ) | | | (4.55 | ) |
Less distributions from: |
Net investment income | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 46.49 | | | $ | 46.92 | | | $ | 51.56 | | | $ | 59.34 | | | $ | 70.79 | |
|
Total Returnd | | | 0.09 | % | | | (9.00 | %) | | | (13.11 | %) | | | (16.20 | %) | | | (6.05 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 6,376 | | | $ | 2,681 | | | $ | 4,203 | | | $ | 6,760 | | | $ | 9,244 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.51 | %) | | | (0.27 | %) | | | (1.14 | %) | | | (1.69 | %) | | | (1.93 | %) |
Total expensesb | | | 2.53 | % | | | 2.51 | % | | | 2.43 | % | | | 2.42 | % | | | 2.41 | % |
Net expensesc | | | 2.51 | % | | | 2.51 | % | | | 2.43 | % | | | 2.42 | % | | | 2.41 | % |
Portfolio turnover rate | | | — | | | | — | | | | 56 | % | | | 114 | % | | | 63 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 52.35 | | | $ | 57.11 | | | $ | 65.22 | | | $ | 77.17 | | | $ | 81.54 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .17 | | | | .29 | | | | (.27 | ) | | | (.70 | ) | | | (.90 | ) |
Net gain (loss) on investments (realized and unrealized) | | | .22 | | | | (5.05 | ) | | | (7.84 | ) | | | (11.25 | ) | | | (3.47 | ) |
Total from investment operations | | | .39 | | | | (4.76 | ) | | | (8.11 | ) | | | (11.95 | ) | | | (4.37 | ) |
Less distributions from: |
Net investment income | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.42 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 52.32 | | | $ | 52.35 | | | $ | 57.11 | | | $ | 65.22 | | | $ | 77.17 | |
|
Total Return | | | 0.85 | % | | | (8.33 | %) | | | (12.43 | %) | | | (15.47 | %) | | | (5.37 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 8,890 | | | $ | 6,772 | | | $ | 4,672 | | | $ | 2,857 | | | $ | 7,319 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.34 | % | | | 0.52 | % | | | (0.45 | %) | | | (0.96 | %) | | | (1.08 | %) |
Total expensesb | | | 1.78 | % | | | 1.77 | % | | | 1.69 | % | | | 1.67 | % | | | 1.67 | % |
Net expensesc | | | 1.76 | % | | | 1.76 | % | | | 1.69 | % | | | 1.67 | % | | | 1.67 | % |
Portfolio turnover rate | | | — | | | | — | | | | 56 | % | | | 114 | % | | | 63 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Does not include expenses of the underlying funds in which the Fund invests. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Total return does not reflect the impact of any applicable sales charges. |
e | Reverse share split — Per share amounts for the periods presented through March 31, 2017 have been restated to reflect 1:6 reverse share split effective October 28, 2016. |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a calendar month basis. The Fund’s current benchmark is 200% of the performance of the NASDAQ-100 Index® (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time different than a full calendar month.
For the one-year period ended March 31, 2020, the Monthly Rebalance NASDAQ-100® 2x Strategy Fund H-Class returned 5.51%, while the NASDAQ-100 Index returned 7.03%.
The sectors contributing the most to the return of the underlying index were Information Technology, Consumer Discretionary, and Health Care. The sectors detracting the most were Industrials, Utilities, and Consumer Staples.
The holdings contributing the most to the return of the underlying index were Microsoft Corp., Apple, Inc., and Amazon.com, Inc. The holdings detracting the most were Cisco Systems, Inc., Comcast Corp. - Class A, and Baidu, Inc. ADR.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the most efficient manner possible and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to compounding, the Fund’s performance generally will not correlate to the performance of the benchmark over periods greater than a full calendar month. For example, the Fund’s compounded returns for periods greater than a full calendar month will be different than the performance of the benchmark over the same period. The effects of compounding on the performance of the Fund will be more pronounced when the underlying index experiences increased volatility, the greater the leverage employed in the Fund, and over longer holding periods. Investors in the Fund should actively monitor and manage their investments to ensure they are consistent with their strategies. The effects of compounding are discussed in more detail on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
| | THE RYDEX FUNDS ANNUAL REPORT | 49 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | November 28, 2014 |
C-Class | November 28, 2014 |
H-Class | November 28, 2014 |
Cumulative Fund Performance*
Ten Largest Holdings (% of Total Net Assets) |
Microsoft Corp. | 6.6% |
Apple, Inc. | 6.2% |
Amazon.com, Inc. | 5.3% |
Guggenheim Strategy Fund II | 4.7% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 4.5% |
Facebook, Inc. — Class A | 2.2% |
Alphabet, Inc. — Class C | 2.2% |
Alphabet, Inc. — Class A | 2.2% |
Intel Corp. | 1.6% |
PepsiCo, Inc. | 1.2% |
Top Ten Total | 36.7% |
| | |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | Since
Inception
(11/28/14) |
A-Class Shares | 5.56% | 22.41% | 21.60% |
A-Class Shares with sales charge‡ | 0.54% | 21.22% | 20.50% |
C-Class Shares | 4.77% | 21.45% | 20.66% |
C-Class Shares with CDSC§ | 3.77% | 21.45% | 20.66% |
H-Class Shares | 5.51% | 23.04% | 22.14% |
NASDAQ-100 Index | 7.03% | 13.81% | 12.94% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
50 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 55.2% |
| | | | | | | | | |
Technology - 24.3% |
Microsoft Corp. | | | 10,696 | | | $ | 1,686,866 | |
Apple, Inc. | | | 6,230 | | | | 1,584,227 | |
Intel Corp. | | | 7,780 | | | | 421,053 | |
NVIDIA Corp. | | | 1,095 | | | | 288,642 | |
Adobe, Inc.* | | | 866 | | | | 275,596 | |
Broadcom, Inc. | | | 709 | | | | 168,104 | |
Texas Instruments, Inc. | | | 1,672 | | | | 167,083 | |
QUALCOMM, Inc. | | | 2,042 | | | | 138,141 | |
Fiserv, Inc.* | | | 1,216 | | | | 115,508 | |
Intuit, Inc. | | | 466 | | | | 107,180 | |
Advanced Micro Devices, Inc.* | | | 1,992 | | | | 90,596 | |
Micron Technology, Inc.* | | | 1,980 | | | | 83,279 | |
Activision Blizzard, Inc. | | | 1,374 | | | | 81,726 | |
Applied Materials, Inc. | | | 1,652 | | | | 75,695 | |
Lam Research Corp. | | | 259 | | | | 62,160 | |
Autodesk, Inc.* | | | 393 | | | | 61,347 | |
Analog Devices, Inc. | | | 659 | | | | 59,079 | |
Electronic Arts, Inc.* | | | 522 | | | | 52,289 | |
Cognizant Technology Solutions Corp. — Class A | | | 979 | | | | 45,494 | |
NetEase, Inc. ADR | | | 130 | | | | 41,725 | |
NXP Semiconductor N.V. | | | 500 | | | | 41,465 | |
KLA Corp. | | | 282 | | | | 40,535 | |
Paychex, Inc. | | | 640 | | | | 40,269 | |
Workday, Inc. — Class A* | | | 293 | | | | 38,154 | |
Cerner Corp. | | | 562 | | | | 35,400 | |
ANSYS, Inc.* | | | 151 | | | | 35,103 | |
Xilinx, Inc. | | | 450 | | | | 35,073 | |
Synopsys, Inc.* | | | 269 | | | | 34,645 | |
ASML Holding N.V. — Class G | | | 132 | | | | 34,536 | |
Splunk, Inc.* | | | 271 | | | | 34,208 | |
Cadence Design Systems, Inc.* | | | 502 | | | | 33,152 | |
Citrix Systems, Inc. | | | 233 | | | | 32,981 | |
Microchip Technology, Inc. | | | 427 | | | | 28,951 | |
Check Point Software Technologies Ltd.* | | | 272 | | | | 27,347 | |
Skyworks Solutions, Inc. | | | 305 | | | | 27,261 | |
Take-Two Interactive Software, Inc.* | | | 203 | | | | 24,078 | |
Maxim Integrated Products, Inc. | | | 484 | | | | 23,527 | |
Western Digital Corp. | | | 532 | | | | 22,142 | |
NetApp, Inc. | | | 408 | | | | 17,009 | |
Total Technology | | | | | | | 6,211,626 | |
| | | | | | | | | |
Communications - 18.3% |
Amazon.com, Inc.* | | | 695 | | | | 1,355,055 | |
Facebook, Inc. — Class A* | | | 3,374 | | | | 562,783 | |
Alphabet, Inc. — Class C* | | | 482 | | | | 560,475 | |
Alphabet, Inc. — Class A* | | | 482 | | | | 560,060 | |
Cisco Systems, Inc. | | | 7,587 | | | | 298,245 | |
Netflix, Inc.* | | | 784 | | | | 294,392 | |
Comcast Corp. — Class A | | | 8,119 | | | | 279,131 | |
Charter Communications, Inc. — Class A* | | | 384 | | | | 167,543 | |
T-Mobile US, Inc.* | | | 1,530 | | | | 128,367 | |
Booking Holdings, Inc.* | | | 75 | | | | 100,899 | |
JD.com, Inc. ADR* | | | 1,658 | | | | 67,149 | |
Baidu, Inc. ADR* | | | 494 | | | | 49,790 | |
eBay, Inc. | | | 1,455 | | | | 43,737 | |
MercadoLibre, Inc.* | | | 89 | | | | 43,484 | |
Sirius XM Holdings, Inc. | | | 7,912 | | | | 39,085 | |
VeriSign, Inc.* | | | 210 | | | | 37,819 | |
CDW Corp. | | | 257 | | | | 23,970 | |
Trip.com Group Ltd. ADR* | | | 935 | | | | 21,926 | |
Fox Corp. — Class A | | | 634 | | | | 14,982 | |
Expedia Group, Inc. | | | 249 | | | | 14,011 | |
Liberty Global plc — Class C* | | | 785 | | | | 12,332 | |
Fox Corp. — Class B | | | 476 | | | | 10,891 | |
Liberty Global plc — Class A* | | | 325 | | | | 5,366 | |
Total Communications | | | | | | | 4,691,492 | |
| | | | | | | | | |
Consumer, Non-cyclical - 7.8% |
PepsiCo, Inc. | | | 2,494 | | | | 299,530 | |
Amgen, Inc. | | | 1,063 | | | | 215,502 | |
PayPal Holdings, Inc.* | | | 2,100 | | | | 201,054 | |
Gilead Sciences, Inc. | | | 2,263 | | | | 169,182 | |
Mondelez International, Inc. — Class A | | | 2,575 | | | | 128,956 | |
Vertex Pharmaceuticals, Inc.* | | | 460 | | | | 109,457 | |
Automatic Data Processing, Inc. | | | 774 | | | | 105,790 | |
Intuitive Surgical, Inc.* | | | 207 | | | | 102,508 | |
Biogen, Inc.* | | | 323 | | | | 102,191 | |
Regeneron Pharmaceuticals, Inc.* | | | 193 | | | | 94,240 | |
Illumina, Inc.* | | | 263 | | | | 71,831 | |
Monster Beverage Corp.* | | | 962 | | | | 54,122 | |
Kraft Heinz Co. | | | 2,184 | | | | 54,032 | |
Verisk Analytics, Inc. — Class A | | | 293 | | | | 40,838 | |
CoStar Group, Inc.* | | | 66 | | | | 38,756 | |
IDEXX Laboratories, Inc.* | | | 153 | | | | 37,063 | |
Alexion Pharmaceuticals, Inc.* | | | 396 | | | | 35,557 | |
Seattle Genetics, Inc.* | | | 307 | | | | 35,422 | |
Cintas Corp. | | | 185 | | | | 32,046 | |
Incyte Corp.* | | | 385 | | | | 28,193 | |
BioMarin Pharmaceutical, Inc.* | | | 321 | | | | 27,124 | |
Align Technology, Inc.* | | | 141 | | | | 24,527 | |
Total Consumer, Non-cyclical | | | | | | | 2,007,921 | |
| | | | | | | | | |
Consumer, Cyclical - 3.8% |
Costco Wholesale Corp. | | | 790 | | | | 225,253 | |
Tesla, Inc.* | | | 322 | | | | 168,728 | |
Starbucks Corp. | | | 2,112 | | | | 138,843 | |
Walgreens Boots Alliance, Inc. | | | 1,596 | | | | 73,017 | |
Ross Stores, Inc. | | | 647 | | | | 56,269 | |
Marriott International, Inc. — Class A | | | 585 | | | | 43,764 | |
Lululemon Athletica, Inc.* | | | 220 | | | | 41,701 | |
O’Reilly Automotive, Inc.* | | | 135 | | | | 40,642 | |
PACCAR, Inc. | | | 619 | | | | 37,839 | |
Fastenal Co. | | | 1,026 | | | | 32,063 | |
Dollar Tree, Inc.* | | | 423 | | | | 31,078 | |
Copart, Inc.* | | | 416 | | | | 28,504 | |
Ulta Beauty, Inc.* | | | 105 | | | | 18,448 | |
United Airlines Holdings, Inc.*,1 | | | 453 | | | | 14,292 | |
American Airlines Group, Inc.1 | | | 783 | | | | 9,545 | |
Total Consumer, Cyclical | | | | | | | 959,986 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
| | Shares | | | Value | |
Utilities - 0.5% |
Exelon Corp. | | | 1,739 | | | $ | 64,012 | |
Xcel Energy, Inc. | | | 959 | | | | 57,828 | |
Total Utilities | | | | | | | 121,840 | |
| | | | | | | | | |
Industrial - 0.3% |
CSX Corp. | | | 1,399 | | | | 80,163 | |
| | | | | | | | | |
Financial - 0.2% |
Willis Towers Watson plc | | | 230 | | | | 39,066 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $13,865,932) | | | | | | | 14,112,094 | |
| | | | | | | | | |
MUTUAL FUNDS† - 9.2% |
Guggenheim Strategy Fund II2 | | | 50,291 | | | | 1,209,488 | |
Guggenheim Ultra Short Duration Fund — Institutional Class2 | | | 117,062 | | | | 1,143,698 | |
Total Mutual Funds | | | | |
(Cost $2,393,996) | | | | | | | 2,353,186 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
U.S. TREASURY BILLS†† - 7.8% |
U.S. Treasury Bills | | | | | | | | |
0.50% due 04/30/203,4 | | $ | 1,996,000 | | | | 1,995,911 | |
| | | | | | | | | |
Total U.S. Treasury Bills | | | | | | | | |
(Cost $1,995,184) | | | | | | | 1,995,911 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,5 - 20.8% | | | | | | | | |
J.P. Morgan Securities LLC issued 03/31/20 at 0.01% due 04/01/206 | | | 3,841,239 | | | | 3,841,239 | |
BofA Securities, Inc. issued 03/31/20 at 0.00% due 04/01/206 | | | 1,477,400 | | | | 1,477,400 | |
Total Repurchase Agreements | | | | | | | | |
(Cost $5,318,639) | | | | | | | 5,318,639 | |
SECURITIES LENDING COLLATERAL†,7 - 0.0% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%8 | | | 5,275 | | | | 5,275 | |
Total Securities Lending Collateral | | | | |
(Cost $5,275) | | | | | | | 5,275 | |
| | | | | | | | | |
Total Investments - 93.0% | | | | |
(Cost $23,579,026) | | $ | 23,785,105 | |
Other Assets & Liabilities, net - 7.0% | | | 1,787,389 | |
Total Net Assets - 100.0% | | $ | 25,572,494 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
NASDAQ-100 Index Mini Futures Contracts | | | 29 | | | | Jun 2020 | | | $ | 4,522,550 | | | $ | 345,252 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Depreciation | |
OTC Equity Index Swap Agreements†† |
Goldman Sachs International | NASDAQ-100 Index | 1.14% (1 Week USD LIBOR + 0.55%) | At Maturity | | | 04/28/20 | | | | 789 | | | $ | 6,166,892 | | | $ | (66,005 | ) |
BNP Paribas | NASDAQ-100 Index | 1.64% (1 Month USD LIBOR + 0.65%) | At Maturity | | | 04/29/20 | | | | 1,357 | | | | 10,599,854 | | | | (113,453 | ) |
Barclays Bank plc | NASDAQ-100 Index | 1.09% (1 Week USD LIBOR + 0.50%) | At Maturity | | | 04/30/20 | | | | 2,025 | | | | 15,822,039 | | | | (152,900 | ) |
| | | | | | | | | | | | | | $ | 32,588,785 | | | $ | (332,358 | ) |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 6. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 14,112,094 | | | $ | — | | | $ | — | | | $ | 14,112,094 | |
Mutual Funds | | | 2,353,186 | | | | — | | | | — | | | | 2,353,186 | |
U.S. Treasury Bills | | | — | | | | 1,995,911 | | | | — | | | | 1,995,911 | |
Repurchase Agreements | | | — | | | | 5,318,639 | | | | — | | | | 5,318,639 | |
Securities Lending Collateral | | | 5,275 | | | | — | | | | — | | | | 5,275 | |
Equity Futures Contracts** | | | 345,252 | | | | — | | | | — | | | | 345,252 | |
Total Assets | | $ | 16,815,807 | | | $ | 7,314,550 | | | $ | — | | | $ | 24,130,357 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 332,358 | | | $ | — | | | $ | 332,358 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 6,369,514 | | | $ | 9,400,000 | | | $ | (14,500,000 | ) | | $ | (68,338 | ) | | $ | 8,312 | | | $ | 1,209,488 | | | | 50,291 | | | $ | 203,782 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 6,371,937 | | | | 10,900,000 | | | | (16,100,000 | ) | | | (23,231 | ) | | | (5,008 | ) | | | 1,143,698 | | | | 117,062 | | | | 176,084 | |
| | | $ | 12,741,451 | | | $ | 20,300,000 | | | $ | (30,600,000 | ) | | $ | (91,569 | ) | | $ | 3,304 | | | $ | 2,353,186 | | | | | | | $ | 379,866 | |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value - including $5,275 of securities loaned (cost $15,866,391) | | $ | 16,113,280 | |
Investments in affiliated issuers, at value (cost $2,393,996) | | | 2,353,186 | |
Repurchase agreements, at value (cost $5,318,639) | | | 5,318,639 | |
Cash | | | 3,045,415 | |
Receivables: |
Fund shares sold | | | 1,382,965 | |
Investment Adviser | | | 31,622 | |
Dividends | | | 15,405 | |
Securities lending income | | | 13 | |
Interest | | | 1 | |
Total assets | | | 28,260,526 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 332,358 | |
Payable for: |
Fund shares redeemed | | | 2,012,049 | |
Management fees | | | 59,118 | |
Variation margin on futures contracts | | | 45,297 | |
Swap settlement | | | 36,690 | |
Professional fees | | | 31,349 | |
Printing fees | | | 30,182 | |
Transfer agent and administrative fees | | | 21,787 | |
Distribution and service fees | | | 16,904 | |
Portfolio accounting fees | | | 6,629 | |
Return of securities lending collateral | | | 5,275 | |
Trustees’ fees* | | | 2,136 | |
Miscellaneous | | | 88,258 | |
Total liabilities | | | 2,688,032 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 25,572,494 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 89,040,785 | |
Total distributable earnings (loss) | | | (63,468,291 | ) |
Net assets | | $ | 25,572,494 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,434,410 | |
Capital shares outstanding | | | 17,161 | |
Net asset value per share | | $ | 141.86 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 148.93 | |
| | | | | |
C-Class: |
Net assets | | $ | 551,869 | |
Capital shares outstanding | | | 4,056 | |
Net asset value per share | | $ | 136.06 | |
| | | | | |
H-Class: |
Net assets | | $ | 22,586,215 | |
Capital shares outstanding | | | 155,515 | |
Net asset value per share | | $ | 145.23 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $1,004) | | $ | 985,603 | |
Dividends from securities of affiliated issuers | | | 379,866 | |
Interest | | | 523,221 | |
Income from securities lending, net | | | 494 | |
Total investment income | | | 1,889,184 | |
| | | | | |
Expenses: |
Management fees | | | 1,194,408 | |
Distribution and service fees: |
A-Class | | | 7,283 | |
C-Class | | | 6,727 | |
H-Class | | | 322,814 | |
Transfer agent and administrative fees | | | 336,993 | |
Portfolio accounting fees | | | 132,711 | |
Professional fees | | | 72,430 | |
Licensing fees | | | 53,201 | |
Printing fees | | | 46,592 | |
Trustees’ fees* | | | 29,467 | |
Pricing fees | | | 28,764 | |
Custodian fees | | | 19,341 | |
Line of credit fees | | | 2,658 | |
Miscellaneous | | | 170,321 | |
Total expenses | | | 2,423,710 | |
Less: |
Expenses waived by Adviser | | | (635,407 | ) |
Net expenses | | | 1,788,303 | |
Net investment income | | | 100,881 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | (3,643,050 | ) |
Investments in affiliated issuers | | | (91,569 | ) |
Swap agreements | | | (4,854,663 | ) |
Futures contracts | | | 3,029,992 | |
Net realized loss | | | (5,559,290 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (6,501,223 | ) |
Investments in affiliated issuers | | | 3,304 | |
Swap agreements | | | (1,536,335 | ) |
Futures contracts | | | (489,712 | ) |
Net change in unrealized appreciation (depreciation) | | | (8,523,966 | ) |
Net realized and unrealized loss | | | (14,083,256 | ) |
Net decrease in net assets resulting from operations | | $ | (13,982,375 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 100,881 | | | $ | 122,242 | |
Net realized gain (loss) on investments | | | (5,559,290 | ) | | | 29,388,114 | |
Net change in unrealized appreciation (depreciation) on investments | | | (8,523,966 | ) | | | 4,693,945 | |
Net increase (decrease) in net assets resulting from operations | | | (13,982,375 | ) | | | 34,204,301 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (3,735 | ) | | | — | |
C-Class | | | (832 | ) | | | — | |
H-Class | | | (203,974 | ) | | | — | |
Total distributions to shareholders | | | (208,541 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 14,654,383 | | | | 5,870,473 | |
C-Class | | | 737,827 | | | | 870,336 | |
H-Class | | | 1,626,392,692 | | | | 475,352,789 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 2,826 | | | | — | |
C-Class | | | 735 | | | | — | |
H-Class | | | 202,106 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (14,843,489 | ) | | | (5,265,587 | ) |
C-Class | | | (746,073 | ) | | | (570,711 | ) |
H-Class | | | (1,718,544,874 | ) | | | (406,018,040 | ) |
Net increase (decrease) from capital share transactions | | | (92,143,867 | ) | | | 70,239,260 | |
Net increase (decrease) in net assets | | | (106,334,783 | ) | | | 104,443,561 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 131,907,277 | | | | 27,463,716 | |
End of year | | $ | 25,572,494 | | | $ | 131,907,277 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 92,924 | | | | 45,931 | |
C-Class | | | 5,051 | | | | 7,067 | |
H-Class | | | 9,985,485 | | | | 3,856,374 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 17 | | | | — | |
C-Class | | | 5 | | | | — | |
H-Class | | | 1,173 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (98,653 | ) | | | (40,617 | ) |
C-Class | | | (4,660 | ) | | | (4,951 | ) |
H-Class | | | (10,762,621 | ) | | | (3,142,899 | ) |
Net increase (decrease) in shares | | | (781,279 | ) | | | 720,905 | |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 134.54 | | | $ | 113.31 | | | $ | 79.32 | | | $ | 54.45 | | | $ | 51.68 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .23 | | | | .25 | | | | (.23 | ) | | | (.18 | ) | | | (.27 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 7.28 | | | | 20.98 | | | | 34.22 | | | | 25.05 | | | | 3.04 | |
Total from investment operations | | | 7.51 | | | | 21.23 | | | | 33.99 | | | | 24.87 | | | | 2.77 | |
Less distributions from: |
Net investment income | | | (.19 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.19 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 141.86 | | | $ | 134.54 | | | $ | 113.31 | | | $ | 79.32 | | | $ | 54.45 | |
|
Total Returnb | | | 5.56 | % | | | 18.74 | % | | | 42.85 | % | | | 45.65 | % | | | 5.38 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,434 | | | $ | 3,077 | | | $ | 1,990 | | | $ | 1,010 | | | $ | 246 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.15 | % | | | 0.19 | % | | | (0.23 | %) | | | (0.28 | %) | | | (0.48 | %) |
Total expensesc | | | 1.83 | % | | | 1.81 | % | | | 1.71 | % | | | 1.72 | % | | | 1.70 | % |
Net expensesd,e | | | 1.34 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % | | | 1.37 | % |
Portfolio turnover rate | | | 990 | % | | | 467 | % | | | 385 | % | | | 259 | % | | | 551 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 130.01 | | | $ | 110.32 | | | $ | 77.79 | | | $ | 53.80 | | | $ | 51.55 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.83 | ) | | | (.64 | ) | | | (1.00 | ) | | | (.73 | ) | | | (.56 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 7.07 | | | | 20.33 | | | | 33.53 | | | | 24.72 | | | | 2.81 | |
Total from investment operations | | | 6.24 | | | | 19.69 | | | | 32.53 | | | | 23.99 | | | | 2.25 | |
Less distributions from: |
Net investment income | | | (.19 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.19 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 136.06 | | | $ | 130.01 | | | $ | 110.32 | | | $ | 77.79 | | | $ | 53.80 | |
|
Total Returnb | | | 4.77 | % | | | 17.85 | % | | | 41.82 | % | | | 44.52 | % | | | 4.40 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 552 | | | $ | 476 | | | $ | 170 | | | $ | 89 | | | $ | 23 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.55 | %) | | | (0.52 | %) | | | (1.02 | %) | | | (1.10 | %) | | | (1.04 | %) |
Total expensesc | | | 2.58 | % | | | 2.57 | % | | | 2.46 | % | | | 2.47 | % | | | 2.51 | % |
Net expensesd,e | | | 2.09 | % | | | 2.11 | % | | | 2.10 | % | | | 2.10 | % | | | 2.17 | % |
Portfolio turnover rate | | | 990 | % | | | 467 | % | | | 385 | % | | | 259 | % | | | 551 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
MONTHLY REBALANCE NASDAQ-100® 2x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 137.80 | | | $ | 116.07 | | | $ | 81.25 | | | $ | 55.79 | | | $ | 51.57 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .12 | | | | .19 | | | | (.25 | ) | | | (.23 | ) | | | (.17 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 7.50 | | | | 21.54 | | | | 35.07 | | | | 25.69 | | | | 4.39 | |
Total from investment operations | | | 7.62 | | | | 21.73 | | | | 34.82 | | | | 25.46 | | | | 4.22 | |
Less distributions from: |
Net investment income | | | (.19 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.19 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 145.23 | | | $ | 137.80 | | | $ | 116.07 | | | $ | 81.25 | | | $ | 55.79 | |
|
Total Return | | | 5.51 | % | | | 18.72 | % | | | 42.86 | % | | | 45.64 | % | | | 8.18 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 22,586 | | | $ | 128,354 | | | $ | 25,304 | | | $ | 28,573 | | | $ | 4,220 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.08 | % | | | 0.15 | % | | | (0.24 | %) | | | (0.35 | %) | | | (0.30 | %) |
Total expensesc | | | 1.82 | % | | | 1.81 | % | | | 1.71 | % | | | 1.72 | % | | | 1.67 | % |
Net expensesd,e | | | 1.34 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % |
Portfolio turnover rate | | | 990 | % | | | 467 | % | | | 385 | % | | | 259 | % | | | 551 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years ended would be: |
| | | 03/31/20 | 03/31/19 | 03/29/18 | 03/31/17 | 03/31/16 |
| | A-Class | 1.33% | 1.35% | 1.35% | 1.35% | 1.35% |
| | C-Class | 2.08% | 2.10% | 2.10% | 2.10% | 2.10% |
| | H-Class | 1.34% | 1.35% | 1.35% | 1.35% | 1.35% |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INVERSE NASDAQ-100® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the NASDAQ-100® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Inverse NASDAQ-100® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the NASDAQ-100 Index.
Inverse NASDAQ-100® Strategy Fund Investor Class returned -12.32%, while the NASDAQ-100 Index returned 7.03%.
The sectors contributing the most to the return of the underlying index were Information Technology, Consumer Discretionary, and Health Care. The sectors detracting the most were Industrials, Utilities, and Consumer Staples.
The holdings contributing the most to the return of the underlying index were Microsoft Corp., Apple, Inc., and Amazon.com, Inc. The holdings detracting the most were Cisco Systems, Inc., Comcast Corp. Class A, and Baidu, Inc. ADR.
Derivatives in the Fund were used to help provide inverse exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
| | THE RYDEX FUNDS ANNUAL REPORT | 59 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
Investor Class | September 3, 1998 |
A-Class | March 31, 2004 |
C-Class | March 7, 2001 |
H-Class | September 18, 2014 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Cumulative Fund Performance*
Largest Holdings (% of Total Net Assets) |
Guggenheim Ultra Short Duration Fund — Institutional Class | 4.6% |
Guggenheim Strategy Fund II | 2.6% |
Total | 7.2% |
| | |
“ Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (12.32%) | (14.58%) | (16.79%) |
A-Class Shares | (12.53%) | (14.55%) | (16.91%) |
A-Class Shares with sales charge‡ | (16.68%) | (15.37%) | (17.31%) |
C-Class Shares | (13.19%) | (15.42%) | (17.65%) |
C-Class Shares with CDSC§ | (14.05%) | (15.42%) | (17.65%) |
NASDAQ-100 Index | 7.03% | 13.81% | 16.17% |
| 1 Year | 5 Year | Since
Inception
(09/18/14) |
H-Class Shares | (12.54%) | (14.80%) | (14.69%) |
NASDAQ-100 Index | 7.03% | 13.81% | 13.65% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
60 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE NASDAQ-100® STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 7.2% |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 284,712 | | | $ | 2,781,641 | |
Guggenheim Strategy Fund II1 | | | 67,419 | | | | 1,621,432 | |
Total Mutual Funds | | | | |
(Cost $4,463,191) | | | | | | | 4,403,073 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY DISCOUNT NOTES†† - 50.2% |
Federal Home Loan Bank |
0.05% due 04/08/202 | | $ | 10,000,000 | | | | 9,999,903 | |
0.30% due 04/29/202 | | | 5,300,000 | | | | 5,298,763 | |
0.40% due 05/08/202 | | | 9,000,000 | | | | 8,996,300 | |
0.51% due 08/03/202 | | | 5,000,000 | | | | 4,998,106 | |
0.30% due 04/13/202 | | | 1,130,000 | | | | 1,129,887 | |
Total Federal Agency Discount Notes | | | | |
(Cost $30,415,898) | | | | | | | 30,422,959 | |
| | | | | | | | | |
FEDERAL AGENCY NOTES†† - 6.1% |
Freddie Mac |
0.01% (U.S. Secured Overnight Financing Rate, Rate Floor: 0.00%) due 04/13/203 | | | 2,000,000 | | | | 1,999,953 | |
Federal Farm Credit Bank |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/223 | | | 750,000 | | | | 751,653 | |
0.44% (U.S. Prime Rate - 2.81%, Rate Floor: 0.00%) due 05/20/223 | | | 240,000 | | | | 240,521 | |
Federal Home Loan Bank |
0.75% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 12/18/203 | | | 700,000 | | | | 700,148 | |
Total Federal Agency Notes | | | | |
(Cost $3,689,567) | | | | | | | 3,692,275 | |
| U.S. TREASURY BILLS††- 0.8% |
| U.S. Treasury Bills |
0.50% due 04/30/202,4 | | | 493,000 | | | | 492,978 | |
| Total U.S. Treasury Bills | | | | | | | | |
| (Cost $492,798) | | | | | | | 492,978 | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS††,5- 19.1% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | | 8,364,126 | | | | 8,364,126 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 3,216,971 | | | | 3,216,971 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $11,581,097) | | | | | | | 11,581,097 | |
| | | | | | | | | |
| Total Investments - 83.4% | | | | | | | | |
| (Cost $50,642,551) | | | | | | $ | 50,592,382 | |
| Other Assets & Liabilities, net - 16.6% | | | | | | | 10,067,484 | |
| Total Net Assets - 100.0% | | | | | | $ | 60,659,866 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Depreciation** | |
Equity Futures Contracts Sold Short† |
NASDAQ-100 Index Mini Futures Contracts | | | 30 | | | | Jun 2020 | | | $ | 4,678,500 | | | $ | (357,235 | ) |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Receive | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation | |
OTC Equity Index Swap Agreements Sold Short†† |
Goldman Sachs International | NASDAQ-100 Index | (0.84)% (1 Week USD LIBOR + 0.25%) | At Maturity | | | 04/28/20 | | | | 3,671 | | | $ | 28,684,252 | | | $ | 279,093 | |
Barclays Bank plc | NASDAQ-100 Index | (0.94)% (1 Week USD LIBOR + 0.35%) | At Maturity | | | 04/30/20 | | | | 3,318 | | | | 25,928,293 | | | | 250,563 | |
BNP Paribas | NASDAQ-100 Index | (1.14)% (1 Month USD LIBOR + 0.15%) | At Maturity | | | 04/29/20 | | | | 178 | | | | 1,392,187 | | | | 14,899 | |
| | | | | | | | | | | | | | $ | 56,004,732 | | | $ | 544,555 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
INVERSE NASDAQ-100® STRATEGY FUND | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 4,403,073 | | | $ | — | | | $ | — | | | $ | 4,403,073 | |
Federal Agency Discount Notes | | | — | | | | 30,422,959 | | | | — | | | | 30,422,959 | |
Federal Agency Notes | | | — | | | | 3,692,275 | | | | — | | | | 3,692,275 | |
U.S. Treasury Bills | | | — | | | | 492,978 | | | | — | | | | 492,978 | |
Repurchase Agreements | | | — | | | | 11,581,097 | | | | — | | | | 11,581,097 | |
Equity Index Swap Agreements** | | | — | | | | 544,555 | | | | — | | | | 544,555 | |
Total Assets | | $ | 4,403,073 | | | $ | 46,733,864 | | | $ | — | | | $ | 51,136,937 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Futures Contracts** | | $ | 357,235 | | | $ | — | | | $ | — | | | $ | 357,235 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INVERSE NASDAQ-100® STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 3,007,586 | | | $ | 300,000 | | | $ | (1,650,000 | ) | | $ | (1,673 | ) | | $ | (34,481 | ) | | $ | 1,621,432 | | | | 67,419 | | | $ | 42,956 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 2,311,807 | | | | 999,999 | | | | (500,000 | ) | | | 501 | | | | (30,666 | ) | | | 2,781,641 | | | | 284,712 | | | | 44,689 | |
| | | $ | 5,319,393 | | | $ | 1,299,999 | | | $ | (2,150,000 | ) | | $ | (1,172 | ) | | $ | (65,147 | ) | | $ | 4,403,073 | | | | | | | $ | 87,645 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
INVERSE NASDAQ-100® STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $34,598,263) | | $ | 34,608,212 | |
Investments in affiliated issuers, at value (cost $4,463,191) | | | 4,403,073 | |
Repurchase agreements, at value (cost $11,581,097) | | | 11,581,097 | |
Cash | | | 6,203,002 | |
Segregated cash with broker | | | 1,910,000 | |
Unrealized appreciation on OTC swap agreements | | | 544,555 | |
Receivables: |
Fund shares sold | | | 3,791,809 | |
Swap settlement | | | 93,795 | |
Variation margin on futures contracts | | | 34,350 | |
Interest | | | 6,134 | |
Dividends | | | 6,029 | |
Total assets | | | 63,182,056 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 2,387,349 | |
Management fees | | | 40,424 | |
Transfer agent and administrative fees | | | 12,465 | |
Portfolio accounting fees | | | 4,533 | |
Trustees’ fees | | | 1,142 | |
Distribution and service fees | | | 1,081 | |
Miscellaneous | | | 75,196 | |
Total liabilities | | | 2,522,190 | |
Commitments and contingent liabilities (Note12) | | | — | |
Net assets | | $ | 60,659,866 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 97,672,097 | |
Total distributable earnings (loss) | | | (37,012,231 | ) |
Net assets | | $ | 60,659,866 | |
| | | | | |
Investor Class: |
Net assets | | $ | 59,320,935 | |
Capital shares outstanding | | | 1,244,936 | |
Net asset value per share | | $ | 47.65 | |
| | | | | |
A-Class: |
Net assets | | $ | 522,518 | |
Capital shares outstanding | | | 11,349 | |
Net asset value per share | | $ | 46.04 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 48.34 | |
| | | | | |
C-Class: |
Net assets | | $ | 233,611 | |
Capital shares outstanding | | | 6,027 | |
Net asset value per share | | $ | 38.76 | |
| | | | | |
H-Class: |
Net assets | | $ | 582,802 | |
Capital shares outstanding | | | 12,849 | |
Net asset value per share | | $ | 45.36 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 87,645 | |
Interest | | | 171,255 | |
Total investment income | | | 258,900 | |
| | | | | |
Expenses: |
Management fees | | | 134,261 | |
Distribution and service fees: |
A-Class | | | 1,554 | |
C-Class | | | 1,435 | |
H-Class | | | 2,403 | |
Transfer agent and administrative fees | | | 38,426 | |
Portfolio accounting fees | | | 14,918 | |
Registration fees | | | 12,612 | |
Professional fees | | | 8,206 | |
Trustees’ fees* | | | 3,170 | |
Custodian fees | | | 2,062 | |
Line of credit fees | | | 55 | |
Miscellaneous | | | 20,532 | |
Total expenses | | | 239,634 | |
Less: |
Expenses waived by Adviser | | | (4,613 | ) |
Net expenses | | | 235,021 | |
Net investment income | | | 23,879 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 4,368 | |
Investments in affiliated issuers | | | (1,172 | ) |
Swap agreements | | | (4,192,889 | ) |
Futures contracts | | | 429,332 | |
Net realized loss | | | (3,760,361 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 10,827 | |
Investments in affiliated issuers | | | (65,147 | ) |
Swap agreements | | | 615,912 | |
Futures contracts | | | (343,318 | ) |
Net change in unrealized appreciation (depreciation) | | | 218,274 | |
Net realized and unrealized loss | | | (3,542,087 | ) |
Net decrease in net assets resulting from operations | | $ | (3,518,208 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 23,879 | | | $ | 125,954 | |
Net realized loss on investments | | | (3,760,361 | ) | | | (2,817,806 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | 218,274 | | | | (288,761 | ) |
Net decrease in net assets resulting from operations | | | (3,518,208 | ) | | | (2,980,613 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (110,169 | ) | | | — | |
A-Class | | | (5,386 | ) | | | — | |
C-Class | | | (975 | ) | | | — | |
H-Class | | | (3,185 | ) | | | — | |
Total distributions to shareholders | | | (119,715 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 178,666,654 | | | | 176,343,541 | |
A-Class | | | 2,499,290 | | | | 4,974,401 | |
C-Class | | | 232,896 | | | | 9,340,131 | |
H-Class | | | 22,452,898 | | | | 71,221,514 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 110,048 | | | | — | |
A-Class | | | 5,386 | | | | — | |
C-Class | | | 940 | | | | — | |
H-Class | | | 3,185 | | | | — | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (122,161,471 | ) | | | (173,569,949 | ) |
A-Class | | | (2,798,481 | ) | | | (4,992,757 | ) |
C-Class | | | (106,531 | ) | | | (9,969,595 | ) |
H-Class | | | (22,382,916 | ) | | | (72,385,819 | ) |
Net increase from capital share transactions | | | 56,521,898 | | | | 961,467 | |
Net increase (decrease) in net assets | | | 52,883,975 | | | | (2,019,146 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 7,775,891 | | | | 9,795,037 | |
End of year | | $ | 60,659,866 | | | $ | 7,775,891 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 3,532,372 | | | | 2,892,671 | |
A-Class | | | 52,824 | | | | 83,715 | |
C-Class | | | 5,698 | | | | 191,511 | |
H-Class | | | 484,862 | | | | 1,239,869 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 2,293 | | | | — | |
A-Class | | | 116 | | | | — | |
C-Class | | | 24 | | | | — | |
H-Class | | | 70 | | | | — | |
Shares redeemed | | | | | | | | |
Investor Class | | | (2,408,027 | ) | | | (2,861,185 | ) |
A-Class | | | (57,338 | ) | | | (84,906 | ) |
C-Class | | | (2,529 | ) | | | (205,483 | ) |
H-Class | | | (478,602 | ) | | | (1,273,160 | ) |
Net increase (decrease) in shares | | | 1,131,763 | | | | (16,968 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
INVERSE NASDAQ-100® STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 54.72 | | | $ | 63.05 | | | $ | 77.68 | | | $ | 96.42 | | | $ | 105.47 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .09 | | | | .56 | | | | .11 | | | | (.51 | ) | | | (1.08 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (6.83 | ) | | | (8.89 | ) | | | (14.74 | ) | | | (18.23 | ) | | | (7.97 | ) |
Total from investment operations | | | (6.74 | ) | | | (8.33 | ) | | | (14.63 | ) | | | (18.74 | ) | | | (9.05 | ) |
Less distributions from: |
Net investment income | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 47.65 | | | $ | 54.72 | | | $ | 63.05 | | | $ | 77.68 | | | $ | 96.42 | |
|
Total Return | | | (12.32 | %) | | | (13.21 | %) | | | (18.83 | %) | | | (19.42 | %) | | | (8.61 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 59,321 | | | $ | 6,473 | | | $ | 5,474 | | | $ | 6,286 | | | $ | 11,857 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.17 | % | | | 0.93 | % | | | 0.16 | % | | | (0.57 | %) | | | (1.04 | %) |
Total expensesb | | | 1.57 | % | | | 1.56 | % | | | 1.46 | % | | | 1.46 | % | | | 1.44 | % |
Net expensesc | | | 1.54 | % | | | 1.54 | % | | | 1.46 | % | | | 1.46 | % | | | 1.44 | % |
Portfolio turnover rate | | | 37 | % | | | 38 | % | | | — | | | | 486 | % | | | 1,674 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 53.01 | | | $ | 61.24 | | | $ | 75.63 | | | $ | 94.01 | | | $ | 101.76 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .19 | | | | .41 | | | | (.08 | ) | | | (1.00 | ) | | | (1.32 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (6.83 | ) | | | (8.64 | ) | | | (14.31 | ) | | | (17.38 | ) | | | (6.43 | ) |
Total from investment operations | | | (6.64 | ) | | | (8.23 | ) | | | (14.39 | ) | | | (18.38 | ) | | | (7.75 | ) |
Less distributions from: |
Net investment income | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 46.04 | | | $ | 53.01 | | | $ | 61.24 | | | $ | 75.63 | | | $ | 94.01 | |
|
Total Returnd | | | (12.53 | %) | | | (13.44 | %) | | | (19.03 | %) | | | (19.54 | %) | | | (7.63 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 523 | | | $ | 835 | | | $ | 1,037 | | | $ | 2,626 | | | $ | 54,948 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.39 | % | | | 0.72 | % | | | (0.12 | %) | | | (1.08 | %) | | | (1.36 | %) |
Total expensesb | | | 1.81 | % | | | 1.81 | % | | | 1.72 | % | | | 1.70 | % | | | 1.69 | % |
Net expensesc | | | 1.76 | % | | | 1.79 | % | | | 1.72 | % | | | 1.70 | % | | | 1.69 | % |
Portfolio turnover rate | | | 37 | % | | | 38 | % | | | — | | | | 486 | % | | | 1,674 | % |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 45.03 | | | $ | 52.43 | | | $ | 65.23 | | | $ | 81.79 | | | $ | 90.32 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.17 | ) | | | (.06 | ) | | | (.48 | ) | | | (1.14 | ) | | | (1.80 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (5.77 | ) | | | (7.34 | ) | | | (12.32 | ) | | | (15.42 | ) | | | (6.73 | ) |
Total from investment operations | | | (5.94 | ) | | | (7.40 | ) | | | (12.80 | ) | | | (16.56 | ) | | | (8.53 | ) |
Less distributions from: |
Net investment income | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 38.76 | | | $ | 45.03 | | | $ | 52.43 | | | $ | 65.23 | | | $ | 81.79 | |
|
Total Returnd | | | (13.19 | %) | | | (14.11 | %) | | | (19.62 | %) | | | (20.26 | %) | | | (9.43 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 234 | | | $ | 128 | | | $ | 881 | | | $ | 1,247 | | | $ | 1,457 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.41 | %) | | | (0.13 | %) | | | (0.84 | %) | | | (1.51 | %) | | | (2.09 | %) |
Total expensesb | | | 2.57 | % | | | 2.53 | % | | | 2.46 | % | | | 2.46 | % | | | 2.44 | % |
Net expensesc | | | 2.53 | % | | | 2.53 | % | | | 2.46 | % | | | 2.46 | % | | | 2.44 | % |
Portfolio turnover rate | | | 37 | % | | | 38 | % | | | — | | | | 486 | % | | | 1,674 | % |
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 52.24 | | | $ | 60.37 | | | $ | 74.56 | | | $ | 92.82 | | | $ | 101.76 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.02 | ) | | | .37 | | | | .07 | | | | (.86 | ) | | | (1.16 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (6.53 | ) | | | (8.50 | ) | | | (14.26 | ) | | | (17.40 | ) | | | (7.78 | ) |
Total from investment operations | | | (6.55 | ) | | | (8.13 | ) | | | (14.19 | ) | | | (18.26 | ) | | | (8.94 | ) |
Less distributions from: |
Net investment income | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.33 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 45.36 | | | $ | 52.24 | | | $ | 60.37 | | | $ | 74.56 | | | $ | 92.82 | |
|
Total Return | | | (12.54 | %) | | | (13.47 | %) | | | (19.03 | %) | | | (19.65 | %) | | | (8.80 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 583 | | | $ | 341 | | | $ | 2,403 | | | $ | 460 | | | $ | 252 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.05 | %) | | | 0.63 | % | | | 0.11 | % | | | (0.95 | %) | | | (1.18 | %) |
Total expensesb | | | 1.82 | % | | | 1.81 | % | | | 1.71 | % | | | 1.70 | % | | | 1.70 | % |
Net expensesc | | | 1.79 | % | | | 1.79 | % | | | 1.71 | % | | | 1.70 | % | | | 1.70 | % |
Portfolio turnover rate | | | 37 | % | | | 38 | % | | | — | | | | 486 | % | | | 1,674 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Does not include expenses of the underlying funds in which the Fund invests. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Total return does not reflect the impact of any applicable sales charges. |
e | Reverse share split — Per share amounts for the periods presented through March 31, 2017, have been restated to reflect a 1:4 reverse share split effective November 4, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
MID-CAP 1.5x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark for midcap securities on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Mid-Cap 1.5x Strategy Fund had a correlation of more than 99% to its benchmark of 150% of the daily price movement of the S&P MidCap 400 Index.
Mid-Cap 1.5x Strategy Fund H-Class returned -37.52%, while the S&P MidCap 400 Index returned -22.51% over the same period.
No sector contributed to the return of the underlying index for the year. The sectors detracting the most were Consumer Discretionary, Financials, and Real Estate.
The holdings contributing the most to the return of the underlying index were Cypress Semiconductor Corp., Cable One, Inc., and Tyler Technologies, Inc. The holdings detracting the most were UGI Corp., National Retail Properties, Inc., and WEX, Inc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
68 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | March 31, 2004 |
C-Class | August 20, 2001 |
H-Class | August 16, 2001 |
Cumulative Fund Performance*
Ten Largest Holdings (% of Total Net Assets) |
Guggenheim Ultra Short Duration Fund — Institutional Class | 6.4% |
Guggenheim Strategy Fund II | 6.2% |
Domino’s Pizza, Inc. | 0.1% |
Teledyne Technologies, Inc. | 0.1% |
Tyler Technologies, Inc. | 0.1% |
West Pharmaceutical Services, Inc. | 0.1% |
Cable One, Inc. | 0.1% |
FactSet Research Systems, Inc. | 0.1% |
Teradyne, Inc. | 0.1% |
Medical Properties Trust, Inc. | 0.1% |
Top Ten Total | 13.4% |
| | |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (37.52%) | (3.21%) | 7.87% |
A-Class Shares with sales charge‡ | (40.49%) | (4.15%) | 7.35% |
C-Class Shares | (37.98%) | (3.93%) | 7.08% |
C-Class Shares with CDSC§ | (38.60%) | (3.93%) | 7.08% |
H-Class Shares | (37.52%) | (3.17%) | 7.91% |
S&P MidCap 400 Index | (22.51%) | 0.56% | 7.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 69 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
MID-CAP 1.5x STRATEGY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 2.4% |
| | | | | | | | | |
Financial - 0.6% |
Medical Properties Trust, Inc. REIT | | | 75 | | | $ | 1,297 | |
Brown & Brown, Inc. | | | 34 | | | | 1,231 | |
Camden Property Trust REIT | | | 14 | | | | 1,109 | |
Alleghany Corp. | | | 2 | | | | 1,105 | |
RenaissanceRe Holdings Ltd. | | | 7 | | | | 1,045 | |
CyrusOne, Inc. REIT | | | 16 | | | | 988 | |
Kilroy Realty Corp. REIT | | | 14 | | | | 892 | |
SEI Investments Co. | | | 18 | | | | 834 | |
Omega Healthcare Investors, Inc. REIT | | | 31 | | | | 823 | |
Jones Lang LaSalle, Inc. | | | 8 | | | | 808 | |
National Retail Properties, Inc. REIT | | | 25 | | | | 805 | |
American Financial Group, Inc. | | | 11 | | | | 771 | |
Reinsurance Group of America, Inc. — Class A | | | 9 | | | | 757 | |
Commerce Bancshares, Inc. | | | 15 | | | | 755 | |
Douglas Emmett, Inc. REIT | | | 24 | | | | 732 | |
First American Financial Corp. | | | 16 | | | | 679 | |
Prosperity Bancshares, Inc. | | | 14 | | | | 675 | |
Kemper Corp. | | | 9 | | | | 669 | |
Life Storage, Inc. REIT | | | 7 | | | | 662 | |
Signature Bank | | | 8 | | | | 643 | |
First Industrial Realty Trust, Inc. REIT | | | 19 | | | | 631 | |
New York Community Bancorp, Inc. | | | 67 | | | | 629 | |
EastGroup Properties, Inc. REIT | | | 6 | | | | 627 | |
Old Republic International Corp. | | | 41 | | | | 625 | |
Lamar Advertising Co. — Class A REIT | | | 12 | | | | 615 | |
Cousins Properties, Inc. REIT | | | 21 | | | | 615 | |
Legg Mason, Inc. | | | 12 | | | | 586 | |
CoreSite Realty Corp. REIT | | | 5 | | | | 580 | |
American Campus Communities, Inc. REIT | | | 20 | | | | 555 | |
Hanover Insurance Group, Inc. | | | 6 | | | | 543 | |
JBG SMITH Properties REIT | | | 17 | | | | 541 | |
East West Bancorp, Inc. | | | 21 | | | | 541 | |
First Financial Bankshares, Inc. | | | 20 | | | | 537 | |
Highwoods Properties, Inc. REIT | | | 15 | | | | 531 | |
Primerica, Inc. | | | 6 | | | | 531 | |
Healthcare Realty Trust, Inc. REIT | | | 19 | | | | 531 | |
RLI Corp. | | | 6 | | | | 528 | |
Eaton Vance Corp. | | | 16 | | | | 516 | |
TCF Financial Corp. | | | 22 | | | | 498 | |
Interactive Brokers Group, Inc. — Class A | | | 11 | | | | 475 | |
Jefferies Financial Group, Inc. | | | 34 | | | | 465 | |
Rayonier, Inc. REIT | | | 19 | | | | 447 | |
Selective Insurance Group, Inc. | | | 9 | | | | 447 | |
Cullen/Frost Bankers, Inc. | | | 8 | | | | 446 | |
SLM Corp. | | | 61 | | | | 439 | |
Affiliated Managers Group, Inc. | | | 7 | | | | 414 | |
Stifel Financial Corp. | | | 10 | | | | 413 | |
Valley National Bancorp | | | 56 | | | | 409 | |
Brixmor Property Group, Inc. REIT | | | 43 | | | | 408 | |
PS Business Parks, Inc. REIT | | | 3 | | | | 407 | |
Brighthouse Financial, Inc.* | | | 16 | | | | 387 | |
Taubman Centers, Inc. REIT1 | | | 9 | | | | 377 | |
Pinnacle Financial Partners, Inc. | | | 10 | | | | 375 | |
Synovus Financial Corp. | | | 21 | | | | 369 | |
Spirit Realty Capital, Inc. REIT | | | 14 | | | | 366 | |
First Horizon National Corp. | | | 45 | | | | 363 | |
Corporate Office Properties Trust REIT | | | 16 | | | | 354 | |
Umpqua Holdings Corp. | | | 32 | | | | 349 | |
FNB Corp. | | | 47 | | | | 346 | |
United Bankshares, Inc. | | | 15 | | | | 346 | |
Janus Henderson Group plc | | | 22 | | | | 337 | |
Bank of Hawaii Corp. | | | 6 | | | | 331 | |
UMB Financial Corp. | | | 7 | | | | 325 | |
Sabra Health Care REIT, Inc. | | | 29 | | | | 317 | |
PotlatchDeltic Corp. REIT | | | 10 | | | | 314 | |
PacWest Bancorp | | | 17 | | | | 305 | |
Sterling Bancorp | | | 29 | | | | 303 | |
Webster Financial Corp. | | | 13 | | | | 298 | |
Associated Banc-Corp. | | | 23 | | | | 294 | |
Washington Federal, Inc. | | | 11 | | | | 286 | |
Bank OZK | | | 17 | | | | 284 | |
Evercore, Inc. — Class A | | | 6 | | | | 276 | |
Fulton Financial Corp. | | | 24 | | | | 276 | |
CNO Financial Group, Inc. | | | 22 | | | | 273 | |
Park Hotels & Resorts, Inc. REIT | | | 34 | | | | 269 | |
Federated Hermes, Inc. — Class B | | | 14 | | | | 267 | |
EPR Properties REIT | | | 11 | | | | 266 | |
BancorpSouth Bank | | | 14 | | | | 265 | |
Home BancShares, Inc. | | | 22 | | | | 264 | |
Wintrust Financial Corp. | | | 8 | | | | 263 | |
Hancock Whitney Corp. | | | 13 | | | | 254 | |
Cathay General Bancorp | | | 11 | | | | 252 | |
Weingarten Realty Investors REIT | | | 17 | | | | 245 | |
CIT Group, Inc. | | | 14 | | | | 242 | |
Genworth Financial, Inc. — Class A* | | | 72 | | | | 239 | |
International Bancshares Corp. | | | 8 | | | | 215 | |
Trustmark Corp. | | | 9 | | | | 210 | |
Pebblebrook Hotel Trust REIT | | | 19 | | | | 207 | |
GEO Group, Inc. REIT | | | 17 | | | | 207 | |
CoreCivic, Inc. REIT | | | 18 | | | | 201 | |
Mack-Cali Realty Corp. REIT | | | 13 | | | | 198 | |
LendingTree, Inc.* | | | 1 | | | | 183 | |
Navient Corp. | | | 24 | | | | 182 | |
Texas Capital Bancshares, Inc.* | | | 8 | | | | 177 | |
Mercury General Corp. | | | 4 | | | | 163 | |
Urban Edge Properties REIT | | | 17 | | | | 150 | |
Service Properties Trust REIT | | | 24 | | | | 130 | |
Diversified Healthcare Trust REIT | | | 34 | | | | 123 | |
Macerich Co. REIT | | | 16 | | | | 90 | |
Total Financial | | | | | | | 45,923 | |
| | | | | | | | | |
Industrial - 0.5% |
Teledyne Technologies, Inc.* | | | 6 | | | | 1,783 | |
Graco, Inc. | | | 24 | | | | 1,170 | |
Trimble, Inc.* | | | 36 | | | | 1,146 | |
Lennox International, Inc. | | | 6 | | | | 1,091 | |
Nordson Corp. | | | 8 | | | | 1,081 | |
Cognex Corp. | | | 25 | | | | 1,055 | |
Carlisle Companies, Inc. | | | 8 | | | | 1,002 | |
Universal Display Corp. | | | 7 | | | | 922 | |
Hubbell, Inc. | | | 8 | | | | 918 | |
AptarGroup, Inc. | | | 9 | | | | 896 | |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
MID-CAP 1.5x STRATEGY FUND | |
| | Shares | | | Value | |
Generac Holdings, Inc.* | | | 9 | | | $ | 839 | |
Gentex Corp. | | | 36 | | | | 798 | |
Tech Data Corp.* | | | 6 | | | | 785 | |
Donaldson Company, Inc. | | | 19 | | | | 734 | |
Trex Company, Inc.* | | | 9 | | | | 721 | |
AECOM* | | | 23 | | | | 686 | |
Sonoco Products Co. | | | 14 | | | | 649 | |
Curtiss-Wright Corp. | | | 7 | | | | 647 | |
Oshkosh Corp. | | | 10 | | | | 643 | |
Axon Enterprise, Inc.* | | | 9 | | | | 637 | |
XPO Logistics, Inc.* | | | 13 | | | | 634 | |
Stericycle, Inc.* | | | 13 | | | | 631 | |
MDU Resources Group, Inc. | | | 29 | | | | 623 | |
Arrow Electronics, Inc.* | | | 12 | | | | 622 | |
Lincoln Electric Holdings, Inc. | | | 9 | | | | 621 | |
Owens Corning | | | 16 | | | | 621 | |
MSA Safety, Inc. | | | 6 | | | | 607 | |
Knight-Swift Transportation Holdings, Inc. | | | 18 | | | | 590 | |
ITT, Inc. | | | 13 | | | | 590 | |
Landstar System, Inc. | | | 6 | | | | 575 | |
Mercury Systems, Inc.* | | | 8 | | | | 571 | |
Tetra Tech, Inc. | | | 8 | | | | 565 | |
National Instruments Corp. | | | 17 | | | | 562 | |
Acuity Brands, Inc. | | | 6 | | | | 514 | |
Jabil, Inc. | | | 20 | | | | 492 | |
EMCOR Group, Inc. | | | 8 | | | | 491 | |
Woodward, Inc. | | | 8 | | | | 476 | |
SYNNEX Corp. | | | 6 | | | | 439 | |
AGCO Corp. | | | 9 | | | | 425 | |
KBR, Inc. | | | 20 | | | | 414 | |
Clean Harbors, Inc.* | | | 8 | | | | 411 | |
Littelfuse, Inc. | | | 3 | | | | 400 | |
Crane Co. | | | 8 | | | | 393 | |
Kirby Corp.* | | | 9 | | | | 391 | |
Regal Beloit Corp. | | | 6 | | | | 378 | |
GATX Corp. | | | 6 | | | | 375 | |
nVent Electric plc | | | 22 | | | | 371 | |
II-VI, Inc.* | | | 13 | | | | 370 | |
Avnet, Inc. | | | 14 | | | | 351 | |
Eagle Materials, Inc. | | | 6 | | | | 351 | |
EnerSys | | | 7 | | | | 347 | |
Timken Co. | | | 10 | | | | 323 | |
Coherent, Inc.* | | | 3 | | | | 319 | |
Silgan Holdings, Inc. | | | 11 | | | | 319 | |
Valmont Industries, Inc. | | | 3 | | | | 318 | |
MasTec, Inc.* | | | 9 | | | | 295 | |
Louisiana-Pacific Corp. | | | 17 | | | | 292 | |
Vishay Intertechnology, Inc. | | | 19 | | | | 274 | |
Energizer Holdings, Inc. | | | 9 | | | | 272 | |
Werner Enterprises, Inc. | | | 7 | | | | 254 | |
Colfax Corp.* | | | 12 | | | | 238 | |
Trinity Industries, Inc. | | | 14 | | | | 225 | |
Kennametal, Inc. | | | 12 | | | | 223 | |
Belden, Inc. | | | 6 | | | | 217 | |
Ryder System, Inc. | | | 8 | | | | 212 | |
Worthington Industries, Inc. | | | 6 | | | | 158 | |
O-I Glass, Inc. | | | 22 | | | | 157 | |
Fluor Corp. | | | 20 | | | | 138 | |
Terex Corp. | | | 9 | | | | 129 | |
Dycom Industries, Inc.* | | | 5 | | | | 128 | |
Greif, Inc. — Class A | | | 4 | | | | 124 | |
Total Industrial | | | | | | | 38,019 | |
| | | | | | | | | |
Consumer, Non-cyclical - 0.4% |
West Pharmaceutical Services, Inc. | | | 11 | | | | 1,675 | |
Molina Healthcare, Inc.* | | | 9 | | | | 1,257 | |
Masimo Corp.* | | | 7 | | | | 1,240 | |
Catalent, Inc.* | | | 22 | | | | 1,143 | |
Service Corporation International | | | 27 | | | | 1,056 | |
Bio-Rad Laboratories, Inc. — Class A* | | | 3 | | | | 1,052 | |
Hill-Rom Holdings, Inc. | | | 10 | | | | 1,006 | |
Bio-Techne Corp. | | | 5 | | | | 948 | |
Amedisys, Inc.* | | | 5 | | | | 918 | |
Encompass Health Corp. | | | 14 | | | | 896 | |
Charles River Laboratories International, Inc.* | | | 7 | | | | 883 | |
Chemed Corp. | | | 2 | | | | 866 | |
Post Holdings, Inc.* | | | 10 | | | | 830 | |
Penumbra, Inc.* | | | 5 | | | | 807 | |
Haemonetics Corp.* | | | 8 | | | | 797 | |
Exelixis, Inc.* | | | 44 | | | | 757 | |
Ingredion, Inc. | | | 10 | | | | 755 | |
PRA Health Sciences, Inc.* | | | 9 | | | | 747 | |
WEX, Inc.* | | | 7 | | | | 732 | |
Repligen Corp.* | | | 7 | | | | 676 | |
United Therapeutics Corp.* | | | 7 | | | | 664 | |
ICU Medical, Inc.* | | | 3 | | | | 605 | |
FTI Consulting, Inc.* | | | 5 | | | | 599 | |
Helen of Troy Ltd.* | | | 4 | | | | 576 | |
Flowers Foods, Inc. | | | 28 | | | | 574 | |
Grand Canyon Education, Inc.* | | | 7 | | | | 534 | |
HealthEquity, Inc.* | | | 10 | | | | 506 | |
ManpowerGroup, Inc. | | | 9 | | | | 477 | |
Globus Medical, Inc. — Class A* | | | 11 | | | | 468 | |
Nektar Therapeutics* | | | 26 | | | | 464 | |
Integra LifeSciences Holdings Corp.* | | | 10 | | | | 447 | |
Darling Ingredients, Inc.* | | | 23 | | | | 441 | |
Lancaster Colony Corp. | | | 3 | | | | 434 | |
NuVasive, Inc.* | | | 8 | | | | 405 | |
Arrowhead Pharmaceuticals, Inc.* | | | 14 | | | | 403 | |
Sanderson Farms, Inc. | | | 3 | | | | 370 | |
Boston Beer Company, Inc. — Class A* | | | 1 | | | | 368 | |
Brink’s Co. | | | 7 | | | | 364 | |
Syneos Health, Inc.* | | | 9 | | | | 355 | |
TreeHouse Foods, Inc.* | | | 8 | | | | 353 | |
Graham Holdings Co. — Class B | | | 1 | | | | 341 | |
CoreLogic, Inc. | | | 11 | | | | 336 | |
LiveRamp Holdings, Inc.* | | | 10 | | | | 329 | |
LivaNova plc* | | | 7 | | | | 317 | |
Sprouts Farmers Market, Inc.* | | | 17 | | | | 316 | |
Hain Celestial Group, Inc.* | | | 12 | | | | 312 | |
Prestige Consumer Healthcare, Inc.* | | | 8 | | | | 294 | |
ASGN, Inc.* | | | 8 | | | | 283 | |
Acadia Healthcare Company, Inc.* | | | 13 | | | | 239 | |
Sabre Corp. | | | 39 | | | | 231 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
MID-CAP 1.5x STRATEGY FUND | |
| | Shares | | | Value | |
Aaron’s, Inc. | | | 10 | | | $ | 228 | |
Tenet Healthcare Corp.* | | | 15 | | | | 216 | |
Adtalem Global Education, Inc.* | | | 8 | | | | 214 | |
Edgewell Personal Care Co.* | | | 8 | | | | 193 | |
Avanos Medical, Inc.* | | | 7 | | | | 189 | |
Insperity, Inc. | | | 5 | | | | 187 | |
Patterson Companies, Inc. | | | 12 | | | | 183 | |
Cantel Medical Corp. | | | 5 | | | | 179 | |
Deluxe Corp. | | | 6 | | | | 156 | |
Ligand Pharmaceuticals, Inc. — Class B* | | | 2 | | | | 145 | |
Pilgrim’s Pride Corp.* | | | 8 | | | | 145 | |
MEDNAX, Inc.* | | | 12 | | | | 140 | |
WW International, Inc.* | | | 7 | | | | 118 | |
Avis Budget Group, Inc.* | | | 8 | | | | 111 | |
Tootsie Roll Industries, Inc.1 | | | 2 | | | | 89 | |
Total Consumer, Non-cyclical | | | | | | | 33,939 | |
| | | | | | | | | |
Consumer, Cyclical - 0.3% |
Domino’s Pizza, Inc. | | | 6 | | | | 1,944 | |
Pool Corp. | | | 6 | | | | 1,181 | |
Toro Co. | | | 16 | | | | 1,042 | |
Casey’s General Stores, Inc. | | | 6 | | | | 795 | |
Watsco, Inc. | | | 5 | | | | 790 | |
Lear Corp. | | | 8 | | | | 650 | |
Dunkin’ Brands Group, Inc. | | | 12 | | | | 637 | |
Churchill Downs, Inc. | | | 6 | | | | 618 | |
Scotts Miracle-Gro Co. — Class A | | | 6 | | | | 614 | |
Five Below, Inc.* | | | 8 | | | | 563 | |
Caesars Entertainment Corp.* | | | 80 | | | | 541 | |
Deckers Outdoor Corp.* | | | 4 | | | | 536 | |
FirstCash, Inc. | | | 7 | | | | 502 | |
Williams-Sonoma, Inc. | | | 11 | | | | 468 | |
Carter’s, Inc. | | | 7 | | | | 460 | |
BJ’s Wholesale Club Holdings, Inc.* | | | 18 | | | | 458 | |
Skechers U.S.A., Inc. — Class A* | | | 19 | | | | 451 | |
Wyndham Hotels & Resorts, Inc. | | | 14 | | | | 441 | |
Mattel, Inc.* | | | 50 | | | | 441 | |
Brunswick Corp. | | | 12 | | | | 425 | |
Wendy’s Co. | | | 27 | | | | 402 | |
Polaris, Inc. | | | 8 | | | | 385 | |
MSC Industrial Direct Company, Inc. — Class A | | | 7 | | | | 385 | |
Texas Roadhouse, Inc. — Class A | | | 9 | | | | 372 | |
Ollie’s Bargain Outlet Holdings, Inc.* | | | 8 | | | | 371 | |
JetBlue Airways Corp.* | | | 41 | | | | 367 | |
Foot Locker, Inc. | | | 16 | | | | 353 | |
Thor Industries, Inc. | | | 8 | | | | 338 | |
Toll Brothers, Inc. | | | 17 | | | | 327 | |
Choice Hotels International, Inc. | | | 5 | | | | 306 | |
Tempur Sealy International, Inc.* | | | 7 | | | | 306 | |
Wyndham Destinations, Inc. | | | 13 | | | | 282 | |
Columbia Sportswear Co. | | | 4 | | | | 279 | |
Marriott Vacations Worldwide Corp. | | | 5 | | | | 278 | |
Healthcare Services Group, Inc. | | | 11 | | | | 263 | |
AutoNation, Inc.* | | | 9 | | | | 253 | |
Cracker Barrel Old Country Store, Inc.1 | | | 3 | | | | 250 | |
World Fuel Services Corp. | | | 9 | | | | 227 | |
KB Home | | | 12 | | | | 217 | |
KAR Auction Services, Inc. | | | 18 | | | | 216 | |
Taylor Morrison Home Corp. — Class A* | | | 19 | | | | 209 | |
Penn National Gaming, Inc.* | | | 16 | | | | 202 | |
RH* | | | 2 | | | | 201 | |
Herman Miller, Inc. | | | 9 | | | | 200 | |
Goodyear Tire & Rubber Co. | | | 33 | | | | 192 | |
Visteon Corp.* | | | 4 | | | | 192 | |
Dick’s Sporting Goods, Inc. | | | 9 | | | | 191 | |
American Eagle Outfitters, Inc. | | | 23 | | | | 183 | |
HNI Corp. | | | 7 | | | | 176 | |
TRI Pointe Group, Inc.* | | | 20 | | | | 175 | |
Nu Skin Enterprises, Inc. — Class A | | | 8 | | | | 175 | |
Dana, Inc. | | | 21 | | | | 164 | |
Cinemark Holdings, Inc. | | | 16 | | | | 163 | |
Papa John’s International, Inc. | | | 3 | | | | 160 | |
Boyd Gaming Corp. | | | 11 | | | | 159 | |
Urban Outfitters, Inc.* | | | 10 | | | | 142 | |
Six Flags Entertainment Corp. | | | 11 | | | | 138 | |
Sally Beauty Holdings, Inc.* | | | 17 | | | | 137 | |
Eldorado Resorts, Inc.* | | | 9 | | | | 129 | |
Adient plc* | | | 12 | | | | 109 | |
Jack in the Box, Inc. | | | 3 | | | | 105 | |
Cheesecake Factory, Inc. | | | 6 | | | | 102 | |
Delphi Technologies plc* | | | 12 | | | | 96 | |
Resideo Technologies, Inc.* | | | 18 | | | | 87 | |
Bed Bath & Beyond, Inc. | | | 19 | | | | 80 | |
Scientific Games Corp. — Class A* | | | 8 | | | | 78 | |
Brinker International, Inc. | | | 5 | | | | 60 | |
Dillard’s, Inc. — Class A | | | 1 | | | | 37 | |
Total Consumer, Cyclical | | | | | | | 23,776 | |
| | | | | | | | | |
Technology - 0.2% |
Tyler Technologies, Inc.* | | | 6 | | | | 1,779 | |
Teradyne, Inc. | | | 24 | | | | 1,300 | |
Cypress Semiconductor Corp. | | | 53 | | | | 1,236 | |
Fair Isaac Corp.* | | | 4 | | | | 1,231 | |
Monolithic Power Systems, Inc. | | | 6 | | | | 1,005 | |
PTC, Inc.* | | | 15 | | | | 918 | |
CACI International, Inc. — Class A* | | | 4 | | | | 845 | |
Lumentum Holdings, Inc.* | | | 11 | | | | 811 | |
Ceridian HCM Holding, Inc.* | | | 14 | | | | 701 | |
MKS Instruments, Inc. | | | 8 | | | | 652 | |
Silicon Laboratories, Inc.* | | | 7 | | | | 598 | |
Cree, Inc.* | | | 16 | | | | 567 | |
CDK Global, Inc. | | | 17 | | | | 558 | |
Cirrus Logic, Inc.* | | | 8 | | | | 525 | |
j2 Global, Inc. | | | 7 | | | | 524 | |
MAXIMUS, Inc. | | | 9 | | | | 524 | |
Science Applications International Corp. | | | 7 | | | | 522 | |
Cabot Microelectronics Corp. | | | 4 | | | | 456 | |
Manhattan Associates, Inc.* | | | 9 | | | | 448 | |
ACI Worldwide, Inc.* | | | 17 | | | | 411 | |
Blackbaud, Inc. | | | 7 | | | | 389 | |
Semtech Corp.* | | | 10 | | | | 375 | |
Perspecta, Inc. | | | 20 | | | | 365 | |
NCR Corp.* | | | 19 | | | | 336 | |
Teradata Corp.* | | | 16 | | | | 328 | |
Synaptics, Inc.* | | | 5 | | | | 289 | |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
MID-CAP 1.5x STRATEGY FUND | |
| | Shares | | | Value | |
CommVault Systems, Inc.* | | | 6 | | | $ | 243 | |
NetScout Systems, Inc.* | | | 9 | | | | 213 | |
Allscripts Healthcare Solutions, Inc.* | | | 23 | | | | 162 | |
Total Technology | | | | | | | 18,311 | |
| | | | | | | | | |
Utilities - 0.1% |
Essential Utilities, Inc. | | | 31 | | | | 1,262 | |
OGE Energy Corp. | | | 29 | | | | 891 | |
UGI Corp. | | | 30 | | | | 800 | |
IDACORP, Inc. | | | 8 | | | | 702 | |
Hawaiian Electric Industries, Inc. | | | 16 | | | | 689 | |
ONE Gas, Inc. | | | 8 | | | | 669 | |
Spire, Inc. | | | 8 | | | | 596 | |
Black Hills Corp. | | | 9 | | | | 576 | |
Southwest Gas Holdings, Inc. | | | 8 | | | | 556 | |
ALLETE, Inc. | | | 8 | | | | 486 | |
NorthWestern Corp. | | | 8 | | | | 479 | |
New Jersey Resources Corp. | | | 14 | | | | 476 | |
National Fuel Gas Co. | | | 12 | | | | 447 | |
PNM Resources, Inc. | | | 11 | | | | 418 | |
Total Utilities | | | | | | | 9,047 | |
| | | | | | | | | |
Communications - 0.1% |
Cable One, Inc. | | | 1 | | | | 1,644 | |
FactSet Research Systems, Inc. | | | 5 | | | | 1,303 | |
Ciena Corp.* | | | 22 | | | | 876 | |
Etsy, Inc.* | | | 18 | | | | 692 | |
New York Times Co. — Class A | | | 21 | | | | 645 | |
LogMeIn, Inc. | | | 7 | | | | 583 | |
GrubHub, Inc.* | | | 13 | | | | 530 | |
TEGNA, Inc. | | | 31 | | | | 337 | |
ViaSat, Inc.* | | | 8 | | | | 287 | |
John Wiley & Sons, Inc. — Class A | | | 7 | | | | 262 | |
TripAdvisor, Inc. | | | 15 | | | | 261 | |
World Wrestling Entertainment, Inc. — Class A | | | 7 | | | | 238 | |
Telephone & Data Systems, Inc. | | | 14 | | | | 235 | |
InterDigital, Inc. | | | 4 | | | | 178 | |
AMC Networks, Inc. — Class A* | | | 7 | | | | 170 | |
Yelp, Inc. — Class A* | | | 9 | | | | 162 | |
Meredith Corp. | | | 6 | | | | 73 | |
Total Communications | | | | | | | 8,476 | |
| | | | | | | | | |
Basic Materials - 0.1% |
RPM International, Inc. | | | 19 | | | | 1,130 | |
Reliance Steel & Aluminum Co. | | | 10 | | | | 876 | |
Royal Gold, Inc. | | | 9 | | | | 789 | |
Steel Dynamics, Inc. | | | 31 | | | | 699 | |
Ashland Global Holdings, Inc. | | | 9 | | | | 451 | |
NewMarket Corp. | | | 1 | | | | 383 | |
Valvoline, Inc. | | | 27 | | | | 353 | |
Sensient Technologies Corp. | | | 7 | | | | 305 | |
Commercial Metals Co. | | | 18 | | | | 284 | |
Olin Corp. | | | 23 | | | | 268 | |
PolyOne Corp. | | | 13 | | | | 247 | |
Minerals Technologies, Inc. | | | 6 | | | | 218 | |
Ingevity Corp.* | | | 6 | | | | 211 | |
Cabot Corp. | | | 8 | | | | 209 | |
Chemours Co. | | | 23 | | | | 204 | |
Compass Minerals International, Inc. | | | 5 | | | | 192 | |
Domtar Corp. | | | 8 | | | | 173 | |
Allegheny Technologies, Inc.* | | | 18 | | | | 153 | |
United States Steel Corp.1 | | | 24 | | | | 151 | |
Carpenter Technology Corp. | | | 7 | | | | 137 | |
Total Basic Materials | | | | | | | 7,433 | |
| | | | | | | | | |
Energy - 0.1% |
SolarEdge Technologies, Inc.* | | | 7 | | | | 573 | |
First Solar, Inc.* | | | 11 | | | | 397 | |
Murphy USA, Inc.* | | | 4 | | | | 337 | |
Equities Corp. | | | 37 | | | | 262 | |
Cimarex Energy Co. | | | 15 | | | | 252 | |
WPX Energy, Inc.* | | | 60 | | | | 183 | |
Equitrans Midstream Corp. | | | 29 | | | | 146 | |
CNX Resources Corp.* | | | 27 | | | | 144 | |
Murphy Oil Corp.1 | | | 21 | | | | 129 | |
PBF Energy, Inc. — Class A | | | 15 | | | | 106 | |
Transocean Ltd.* | | | 83 | | | | 96 | |
Antero Midstream Corp. | | | 43 | | | | 90 | |
NOW, Inc.* | | | 16 | | | | 83 | |
Core Laboratories N.V. | | | 7 | | | | 72 | |
Patterson-UTI Energy, Inc. | | | 28 | | | | 66 | |
Apergy Corp.*,1 | | | 11 | | | | 63 | |
Matador Resources Co.* | | | 16 | | | | 40 | |
Total Energy | | | | | | | 3,039 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $219,854) | | | | | | | 187,963 | |
| | | | | | | | | |
MUTUAL FUNDS† - 12.6% |
Guggenheim Ultra Short Duration Fund — Institutional Class2 | | | 52,195 | | | | 509,945 | |
Guggenheim Strategy Fund II2 | | | 20,459 | | | | 492,048 | |
Total Mutual Funds | | | | |
(Cost $1,027,050) | | | | | | | 1,001,993 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
U.S. TREASURY BILLS†† - 2.5% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | $ | 201,000 | | | | 200,991 | |
Total U.S. Treasury Bills | | | | |
(Cost $200,918) | | | | | | | 200,991 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
MID-CAP 1.5x STRATEGY FUND | |
| | | Face
Amount | | | Value | |
| REPURCHASE AGREEMENTS††,5- 44.9% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | $ | 2,571,173 | | | $ | 2,571,173 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 988,913 | | | | 988,913 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $3,560,086) | | | | | | | 3,560,086 | |
| | | Shares | | | | |
| SECURITIES LENDING COLLATERAL†,7- 0.0% |
| Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%8 | | | 642 | | | | 642 | |
| Total Securities Lending Collateral | | | | | | | | |
| (Cost $642) | | | | | | | 642 | |
| | | | | | | | | |
| Total Investments - 62.4% | | | | | | | | |
| (Cost $5,008,550) | | | | | | $ | 4,951,675 | |
| Other Assets & Liabilities, net - 37.6% | | | | | | | 2,984,658 | |
| Total Net Assets - 100.0% | | | | | | $ | 7,936,333 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
S&P MidCap 400 Index Mini Futures Contracts | | | 25 | | | | Jun 2020 | | | $ | 3,600,000 | | | $ | 104,598 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
OTC Equity Index Swap Agreements†† |
Barclays Bank plc | S&P MidCap 400 Index | 0.94% (1 Week USD LIBOR + 0.35%) | At Maturity | | | 04/30/20 | | | | 3,134 | | | $ | 4,523,131 | | | $ | 170,910 | |
BNP Paribas | S&P MidCap 400 Index | 1.44% (1 Month USD LIBOR + 0.45%) | At Maturity | | | 04/29/20 | | | | 198 | | | | 285,776 | | | | (5,569 | ) |
Goldman Sachs International | S&P MidCap 400 Index | 0.99% (1 Week USD LIBOR + 0.40%) | At Maturity | | | 04/28/20 | | | | 2,299 | | | | 3,317,821 | | | | (60,568 | ) |
| | | | | | | | | | | | | | $ | 8,126,728 | | | $ | 104,773 | |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
MID-CAP 1.5x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 187,963 | | | $ | — | | | $ | — | | | $ | 187,963 | |
Mutual Funds | | | 1,001,993 | | | | — | | | | — | | | | 1,001,993 | |
U.S. Treasury Bills | | | — | | | | 200,991 | | | | — | | | | 200,991 | |
Repurchase Agreements | | | — | | | | 3,560,086 | | | | — | | | | 3,560,086 | |
Securities Lending Collateral | | | 642 | | | | — | | | | — | | | | 642 | |
Equity Futures Contracts** | | | 104,598 | | | | — | | | | — | | | | 104,598 | |
Equity Index Swap Agreements** | | | — | | | | 170,910 | | | | — | | | | 170,910 | |
Total Assets | | $ | 1,295,196 | | | $ | 3,931,987 | | | $ | — | | | $ | 5,227,183 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 66,137 | | | $ | — | | | $ | 66,137 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 4,772,674 | | | $ | 2,500,000 | | | $ | (6,700,000 | ) | | $ | (84,964 | ) | | $ | 4,338 | | | $ | 492,048 | | | | 20,459 | | | $ | 135,817 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 4,057,739 | | | | 3,000,000 | | | | (6,500,000 | ) | | | (47,821 | ) | | | 27 | | | | 509,945 | | | | 52,195 | | | | 103,464 | |
| | | $ | 8,830,413 | | | $ | 5,500,000 | | | $ | (13,200,000 | ) | | $ | (132,785 | ) | | $ | 4,365 | | | $ | 1,001,993 | | | | | | | $ | 239,281 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
MID-CAP 1.5x STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value - including $623 of securities loaned (cost $421,414) | | $ | 389,596 | |
Investments in affiliated issuers, at value (cost $1,027,050) | | | 1,001,993 | |
Repurchase agreements, at value (cost $3,560,086) | | | 3,560,086 | |
Cash | | | 2,375,924 | |
Segregated cash with broker | | | 406,083 | |
Unrealized appreciation on OTC swap agreements | | | 170,910 | |
Receivables: |
Fund shares sold | | | 161,000 | |
Dividends | | | 9,115 | |
Securities lending income | | | 1 | |
Interest | | | 1 | |
Total assets | | | 8,074,709 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 66,137 | |
Payable for: |
Variation margin on futures contracts | | | 33,500 | |
Management fees | | | 6,232 | |
Swap settlement | | | 5,557 | |
Distribution and service fees | | | 3,258 | |
Fund shares redeemed | | | 2,845 | |
Transfer agent and administrative fees | | | 2,606 | |
Portfolio accounting fees | | | 748 | |
Return of securities lending collateral | | | 642 | |
Trustees’ fees | | | 223 | |
Miscellaneous | | | 16,628 | |
Total liabilities | | | 138,376 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 7,936,333 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 16,002,561 | |
Total distributable earnings (loss) | | | (8,066,228 | ) |
Net assets | | $ | 7,936,333 | |
| | | | | |
A-Class: |
Net assets | | $ | 1,949,949 | |
Capital shares outstanding | | | 34,806 | |
Net asset value per share | | $ | 56.02 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 58.81 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,932,599 | |
Capital shares outstanding | | | 40,108 | |
Net asset value per share | | $ | 48.18 | |
| | | | | |
H-Class: |
Net assets | | $ | 4,053,785 | |
Capital shares outstanding | | | 72,075 | |
Net asset value per share | | $ | 56.24 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $9) | | $ | 380,642 | |
Dividends from securities of affiliated issuers | | | 239,281 | |
Interest | | | 173,835 | |
Income from securities lending, net | | | 1,495 | |
Total investment income | | | 795,253 | |
| | | | | |
Expenses: |
Management fees | | | 346,715 | |
Distribution and service fees: |
A-Class | | | 7,301 | |
C-Class | | | 35,137 | |
H-Class | | | 80,224 | |
Transfer agent and administrative fees | | | 97,045 | |
Registration fees | | | 40,892 | |
Portfolio accounting fees | | | 38,524 | |
Professional fees | | | 13,900 | |
Pricing fees | | | 9,054 | |
Printing fees | | | 6,786 | |
Trustees’ fees* | | | 6,614 | |
Custodian fees | | | 5,480 | |
Miscellaneous | | | 28,725 | |
Total expenses | | | 716,397 | |
Less: |
Expenses waived by Adviser | | | (10,857 | ) |
Net expenses | | | 705,540 | |
Net investment income | | | 89,713 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 4,170,674 | |
Investments in affiliated issuers | | | (132,785 | ) |
Swap agreements | | | (1,584,528 | ) |
Futures contracts | | | 338,010 | |
Net realized gain | | | 2,791,371 | |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (31,434 | ) |
Investments in affiliated issuers | | | 4,365 | |
Swap agreements | | | (206,604 | ) |
Futures contracts | | | 68,475 | |
Net change in unrealized appreciation (depreciation) | | | (165,198 | ) |
Net realized and unrealized gain | | | 2,626,173 | |
Net increase in net assets resulting from operations | | $ | 2,715,886 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 89,713 | | | $ | 221,832 | |
Net realized gain (loss) on investments | | | 2,791,371 | | | | (11,469,654 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (165,198 | ) | | | 543,840 | |
Net increase (decrease) in net assets resulting from operations | | | 2,715,886 | | | | (10,703,982 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (6,471 | ) | | | (17,300 | ) |
C-Class | | | (7,932 | ) | | | (20,379 | ) |
H-Class | | | (209,346 | ) | | | (714,618 | ) |
Total distributions to shareholders | | | (223,749 | ) | | | (752,297 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 1,361,417 | | | | 2,971,226 | |
C-Class | | | 75,744 | | | | 141,109 | |
H-Class | | | 326,944,951 | | | | 475,373,044 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 6,428 | | | | 17,188 | |
C-Class | | | 7,890 | | | | 20,268 | |
H-Class | | | 84,839 | | | | 206,077 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (1,750,513 | ) | | | (1,816,063 | ) |
C-Class | | | (639,883 | ) | | | (2,380,353 | ) |
H-Class | | | (341,855,663 | ) | | | (464,080,804 | ) |
Net increase (decrease) from capital share transactions | | | (15,764,790 | ) | | | 10,451,692 | |
Net decrease in net assets | | | (13,272,653 | ) | | | (1,004,587 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 21,208,986 | | | | 22,213,573 | |
End of year | | $ | 7,936,333 | | | $ | 21,208,986 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 16,057 | | | | 31,646 | |
C-Class | | | 951 | | | | 1,782 | |
H-Class | | | 3,423,458 | | | | 5,641,695 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 66 | | | | 210 | |
C-Class | | | 94 | | | | 285 | |
H-Class | | | 869 | | | | 2,500 | |
Shares redeemed | | | | | | | | |
A-Class | | | (19,942 | ) | | | (19,592 | ) |
C-Class | | | (8,742 | ) | | | (28,644 | ) |
H-Class | | | (3,507,691 | ) | | | (5,642,422 | ) |
Net decrease in shares | | | (94,880 | ) | | | (12,540 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 77 |
MID-CAP 1.5x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 89.82 | | | $ | 90.38 | | | $ | 79.90 | | | $ | 61.64 | | | $ | 67.32 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .37 | | | | .58 | | | | .15 | | | | (.09 | ) | | | (.47 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (33.98 | ) | | | (.73 | ) | | | 10.83 | | | | 18.50 | | | | (4.81 | ) |
Total from investment operations | | | (33.61 | ) | | | (.15 | ) | | | 10.98 | | | | 18.41 | | | | (5.28 | ) |
Less distributions from: |
Net investment income | | | (.19 | ) | | | (.11 | ) | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | (.30 | ) | | | (.50 | ) | | | (.15 | ) | | | (.40 | ) |
Total distributions | | | (.19 | ) | | | (.41 | ) | | | (.50 | ) | | | (.15 | ) | | | (.40 | ) |
Net asset value, end of period | | $ | 56.02 | | | $ | 89.82 | | | $ | 90.38 | | | $ | 79.90 | | | $ | 61.64 | |
|
Total Returnb | | | (37.52 | %) | | | (0.11 | %) | | | 13.74 | % | | | 29.88 | % | | | (7.86 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,950 | | | $ | 3,469 | | | $ | 2,382 | | | $ | 1,935 | | | $ | 1,879 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.40 | % | | | 0.64 | % | | | 0.17 | % | | | (0.13 | %) | | | (0.75 | %) |
Total expensesc | | | 1.77 | % | | | 1.77 | % | | | 1.67 | % | | | 1.68 | % | | | 1.65 | % |
Net expensesd | | | 1.72 | % | | | 1.75 | % | | | 1.67 | % | | | 1.68 | % | | | 1.65 | % |
Portfolio turnover rate | | | 617 | % | | | 721 | % | | | 722 | % | | | 1,216 | % | | | 1,506 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 77.86 | | | $ | 78.99 | | | $ | 70.42 | | | $ | 54.73 | | | $ | 60.27 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.27 | ) | | | (.09 | ) | | | (.51 | ) | | | (.65 | ) | | | (.78 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (29.22 | ) | | | (.63 | ) | | | 9.58 | | | | 16.49 | | | | (4.36 | ) |
Total from investment operations | | | (29.49 | ) | | | (.72 | ) | | | 9.07 | | | | 15.84 | | | | (5.14 | ) |
Less distributions from: |
Net investment income | | | (.19 | ) | | | (.11 | ) | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | (.30 | ) | | | (.50 | ) | | | (.15 | ) | | | (.40 | ) |
Total distributions | | | (.19 | ) | | | (.41 | ) | | | (.50 | ) | | | (.15 | ) | | | (.40 | ) |
Net asset value, end of period | | $ | 48.18 | | | $ | 77.86 | | | $ | 78.99 | | | $ | 70.42 | | | $ | 54.73 | |
|
Total Returnb | | | (37.98 | %) | | | (0.86 | %) | | | 12.89 | % | | | 28.94 | % | | | (8.55 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,933 | | | $ | 3,722 | | | $ | 5,875 | | | $ | 7,720 | | | $ | 4,794 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.34 | %) | | | (0.12 | %) | | | (0.68 | %) | | | (1.05 | %) | | | (1.41 | %) |
Total expensesc | | | 2.52 | % | | | 2.51 | % | | | 2.43 | % | | | 2.42 | % | | | 2.40 | % |
Net expensesd | | | 2.47 | % | | | 2.50 | % | | | 2.43 | % | | | 2.42 | % | | | 2.40 | % |
Portfolio turnover rate | | | 617 | % | | | 721 | % | | | 722 | % | | | 1,216 | % | | | 1,506 | % |
78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 90.18 | | | $ | 90.82 | | | $ | 80.23 | | | $ | 61.85 | | | $ | 67.45 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .27 | | | | .42 | | | | .35 | | | | (.37 | ) | | | (.57 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (34.02 | ) | | | (.65 | ) | | | 10.74 | | | | 18.90 | | | | (4.63 | ) |
Total from investment operations | | | (33.75 | ) | | | (.23 | ) | | | 11.09 | | | | 18.53 | | | | (5.20 | ) |
Less distributions from: |
Net investment income | | | (.19 | ) | | | (.11 | ) | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | (.30 | ) | | | (.50 | ) | | | (.15 | ) | | | (.40 | ) |
Total distributions | | | (.19 | ) | | | (.41 | ) | | | (.50 | ) | | | (.15 | ) | | | (.40 | ) |
Net asset value, end of period | | $ | 56.24 | | | $ | 90.18 | | | $ | 90.82 | | | $ | 80.23 | | | $ | 61.85 | |
|
Total Return | | | (37.52 | %) | | | (0.21 | %) | | | 13.82 | % | | | 29.97 | % | | | (7.73 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 4,054 | | | $ | 14,017 | | | $ | 13,956 | | | $ | 20,071 | | | $ | 13,611 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.28 | % | | | 0.49 | % | | | 0.39 | % | | | (0.50 | %) | | | (0.93 | %) |
Total expensesc | | | 1.79 | % | | | 1.78 | % | | | 1.66 | % | | | 1.68 | % | | | 1.66 | % |
Net expensesd | | | 1.77 | % | | | 1.77 | % | | | 1.66 | % | | | 1.68 | % | | | 1.66 | % |
Portfolio turnover rate | | | 617 | % | | | 721 | % | | | 722 | % | | | 1,216 | % | | | 1,506 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INVERSE MID-CAP STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the year ended March 31, 2020, Inverse Mid-Cap Strategy Fund achieved a daily correlation of more than 99% to its benchmark of -100% of the daily price movement of the S&P MidCap 400 Index.
Inverse Mid-Cap Strategy Fund H-Class returned 18.11%, while the S&P MidCap 400 Index returned -22.51% over the same period.
No sector contributed to the return of the underlying index for the year. The sectors detracting the most were Consumer Discretionary, Financials, and Real Estate.
The holdings contributing the most to the return of the underlying index were Cypress Semiconductor Corp., Cable One, Inc., and Tyler Technologies, Inc. The holdings detracting the most were UGI Corp., National Retail Properties, Inc., and WEX, Inc.
Derivatives in the Fund were used to help provide inverse exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
80 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | March 31, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Cumulative Fund Performance*
Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund II | 6.8% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 6.7% |
Total | 13.5% |
| | |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 18.13% | (3.47%) | (10.94%) |
A-Class Shares with sales charge‡ | 12.51% | (4.41%) | (11.37%) |
C-Class Shares | 16.78% | (4.26%) | (11.64%) |
C-Class Shares with CDSC§ | 15.78% | (4.26%) | (11.64%) |
H-Class Shares | 18.11% | (3.43%) | (10.93%) |
S&P MidCap 400 Index | (22.51%) | 0.56% | 7.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 81 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE MID-CAP STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 13.5% |
Guggenheim Strategy Fund II1 | | | 4,401 | | | $ | 105,850 | |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 10,603 | | | | 103,595 | |
Total Mutual Funds | | | | |
(Cost $214,490) | | | | | | | 209,445 | |
| | | | | | | | | |
| | | Face
Amount | | | | |
| REPURCHASE AGREEMENTS††,2- 48.2% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/203 | | $ | 538,659 | | | | 538,659 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/203 | | | 207,177 | | | | 207,177 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $745,836) | | | | | | | 745,836 | |
| | | | | | | | | |
| Total Investments - 61.7% | | | | | | | | |
| (Cost $960,326) | | | | | | $ | 955,281 | |
| Other Assets & Liabilities, net - 38.3% | | | | | | | 592,321 | |
| Total Net Assets - 100.0% | | | | | | $ | 1,547,602 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Receive | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation | |
OTC Equity Index Swap Agreements Sold Short†† |
BNP Paribas | S&P MidCap 400 Index | (0.94)% (1 Month USD LIBOR - 0.05%) | At Maturity | | | 04/29/20 | | | | 411 | | | $ | 593,089 | | | $ | 11,558 | |
Goldman Sachs International | S&P MidCap 400 Index | (0.69)% (1 Week USD LIBOR + 0.10%) | At Maturity | | | 04/28/20 | | | | 487 | | | | 703,574 | | | | 6,956 | |
Barclays Bank plc | S&P MidCap 400 Index | (0.79)% (1 Week USD LIBOR + 0.20%) | At Maturity | | | 04/30/20 | | | | 165 | | | | 238,304 | | | | 2,600 | |
| | | | | | | | | | | | | | $ | 1,534,967 | | | $ | 21,114 | |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Repurchase Agreements — See Note 6. |
3 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 209,445 | | | $ | — | | | $ | — | | | $ | 209,445 | |
Repurchase Agreements | | | — | | | | 745,836 | | | | — | | | | 745,836 | |
Equity Index Swap Agreements** | | | — | | | | 21,114 | | | | — | | | | 21,114 | |
Total Assets | | $ | 209,445 | | | $ | 766,950 | | | $ | — | | | $ | 976,395 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INVERSE MID-CAP STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 304,618 | | | $ | — | | | $ | (195,000 | ) | | $ | (422 | ) | | $ | (3,346 | ) | | $ | 105,850 | | | | 4,401 | | | $ | 6,999 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 306,048 | | | | — | | | | (199,981 | ) | | | (151 | ) | | | (2,321 | ) | | | 103,595 | | | | 10,603 | | | | 6,111 | |
| | | $ | 610,666 | | | $ | — | | | $ | (394,981 | ) | | $ | (573 | ) | | $ | (5,667 | ) | | $ | 209,445 | | | | | | | $ | 13,110 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
INVERSE MID-CAP STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in affiliated issuers, at value (cost $214,490) | | $ | 209,445 | |
Repurchase agreements, at value (cost $745,836) | | | 745,836 | |
Cash | | | 509,757 | |
Segregated cash with broker | | | 17,000 | |
Unrealized appreciation on OTC swap agreements | | | 21,114 | |
Receivables: |
Fund shares sold | | | 86,534 | |
Variation margin on futures contracts | | | 1,968 | |
Dividends | | | 395 | |
Total assets | | | 1,592,049 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 38,504 | |
Swap settlement | | | 3,481 | |
Management fees | | | 694 | |
Transfer agent and administrative fees | | | 225 | |
Distribution and service fees | | | 199 | |
Portfolio accounting fees | | | 79 | |
Trustees’ fees* | | | 19 | |
Miscellaneous | | | 1,246 | |
Total liabilities | | | 44,447 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 1,547,602 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 6,419,565 | |
Total distributable earnings (loss) | | | (4,871,963 | ) |
Net assets | | $ | 1,547,602 | |
| | | | | |
A-Class: |
Net assets | | $ | 59,693 | |
Capital shares outstanding | | | 2,334 | |
Net asset value per share | | $ | 25.58 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 26.86 | |
| | | | | |
C-Class: |
Net assets | | $ | 22 | |
Capital shares outstanding | | | 1 | |
Net asset value per share | | $ | 22.46 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,487,887 | |
Capital shares outstanding | | | 58,122 | |
Net asset value per share | | $ | 25.60 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 13,110 | |
Interest | | | 6,457 | |
Total investment income | | | 19,567 | |
| | | | | |
Expenses: |
Management fees | | | 7,467 | |
Distribution and service fees: |
A-Class | | | 269 | |
H-Class | | | 1,805 | |
Transfer agent and administrative fees | | | 2,100 | |
Registration fees | | | 886 | |
Portfolio accounting fees | | | 830 | |
Professional fees | | | 487 | |
Trustees’ fees* | | | 244 | |
Custodian fees | | | 121 | |
Miscellaneous | | | 531 | |
Total expenses | | | 14,740 | |
Less: |
Expenses waived by Adviser | | | (609 | ) |
Net expenses | | | 14,131 | |
Net investment income | | | 5,436 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in affiliated issuers | | | (573 | ) |
Swap agreements | | | (45,075 | ) |
Futures contracts | | | (1,894 | ) |
Net realized loss | | | (47,542 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in affiliated issuers | | | (5,667 | ) |
Swap agreements | | | 31,158 | |
Net change in unrealized appreciation (depreciation) | | | 25,491 | |
Net realized and unrealized loss | | | (22,051 | ) |
Net decrease in net assets resulting from operations | | $ | (16,615 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 5,436 | | | $ | 6,613 | |
Net realized loss on investments | | | (47,542 | ) | | | (129,549 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | 25,491 | | | | (7,137 | ) |
Net decrease in net assets resulting from operations | | | (16,615 | ) | | | (130,073 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (688 | ) | | | — | |
H-Class | | | (4,900 | ) | | | — | |
Total distributions to shareholders | | | (5,588 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 79,204 | | | | 1,548,797 | |
C-Class | | | — | | | | 81,736 | |
H-Class | | | 9,983,986 | | | | 19,268,674 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 688 | | | | — | |
H-Class | | | 4,841 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (170,994 | ) | | | (1,515,031 | ) |
C-Class | | | (107 | ) | | | (82,834 | ) |
H-Class | | | (9,229,767 | ) | | | (18,935,916 | ) |
Net increase from capital share transactions | | | 667,851 | | | | 365,426 | |
Net increase in net assets | | | 645,648 | | | | 235,353 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 901,954 | | | | 666,601 | |
End of year | | $ | 1,547,602 | | | $ | 901,954 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 3,110 | | | | 65,707 | |
C-Class | | | — | | | | 4,272 | |
H-Class | | | 451,736 | | | | 863,821 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 34 | | | | — | |
H-Class | | | 238 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (6,901 | ) | | | (66,605 | ) |
C-Class | | | (5 | ) | | | (4,361 | ) |
H-Class | | | (429,060 | ) | | | (851,436 | ) |
Net increase in shares | | | 19,152 | | | | 11,398 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
INVERSE MID-CAP STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 21.82 | | | $ | 22.31 | | | $ | 24.92 | | | $ | 30.70 | | | $ | 30.76 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .15 | | | | .13 | | | | (.11 | ) | | | (.28 | ) | | | (.38 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.77 | e | | | (.62 | ) | | | (2.50 | ) | | | (5.50 | ) | | | .32 | |
Total from investment operations | | | 3.92 | | | | (.49 | ) | | | (2.61 | ) | | | (5.78 | ) | | | (.06 | ) |
Less distributions from: |
Net investment income | | | (.16 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.16 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 25.58 | | | $ | 21.82 | | | $ | 22.31 | | | $ | 24.92 | | | $ | 30.70 | |
|
Total Returnb | | | 18.13 | % | | | (2.20 | %) | | | (10.47 | %) | | | (18.89 | %) | | | (0.16 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 60 | | | $ | 133 | | | $ | 156 | | | $ | 226 | | | $ | 111 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.68 | % | | | 0.60 | % | | | (0.49 | %) | | | (1.02 | %) | | | (1.18 | %) |
Total expensesc | | | 1.77 | % | | | 1.77 | % | | | 1.68 | % | | | 1.68 | % | | | 1.65 | % |
Net expensesd | | | 1.70 | % | | | 1.75 | % | | | 1.68 | % | | | 1.68 | % | | | 1.65 | % |
Portfolio turnover rate | | | — | | | | 48 | % | | | 37 | % | | | 120 | % | | | 199 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 19.40 | | | $ | 19.94 | | | $ | 22.46 | | | $ | 27.89 | | | $ | 28.16 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | — | f | | | (.06 | ) | | | (.28 | ) | | | (.48 | ) | | | (.59 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.22 | e | | | (.48 | ) | | | (2.24 | ) | | | (4.95 | ) | | | .32 | |
Total from investment operations | | | 3.22 | | | | (.54 | ) | | | (2.52 | ) | | | (5.43 | ) | | | (.27 | ) |
Less distributions from: |
Net investment income | | | (.16 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.16 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 22.46 | | | $ | 19.40 | | | $ | 19.94 | | | $ | 22.46 | | | $ | 27.89 | |
|
Total Returnb | | | 16.78 | % | | | (2.71 | %) | | | (11.22 | %) | | | (19.51 | %) | | | (0.96 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | — | g | | $ | — | g | | $ | 2 | | | $ | 36 | | | $ | 273 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.00 | %h | | | (0.33 | %) | | | (1.30 | %) | | | (1.85 | %) | | | (2.00 | %) |
Total expensesc | | | 2.63 | % | | | 2.47 | % | | | 2.44 | % | | | 2.42 | % | | | 2.41 | % |
Net expenses | | | 2.63 | % | | | 2.47 | % | | | 2.44 | % | | | 2.42 | % | | | 2.41 | % |
Portfolio turnover rate | | | — | | | | 48 | % | | | 37 | % | | | 120 | % | | | 199 | % |
86 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 21.84 | | | $ | 22.29 | | | $ | 24.90 | | | $ | 30.69 | | | $ | 30.70 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .14 | | | | .13 | | | | (.09 | ) | | | (.31 | ) | | | (.42 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.78 | e | | | (.58 | ) | | | (2.52 | ) | | | (5.48 | ) | | | .41 | |
Total from investment operations | | | 3.92 | | | | (.45 | ) | | | (2.61 | ) | | | (5.79 | ) | | | (.01 | ) |
Less distributions from: |
Net investment income | | | (.16 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.16 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 25.60 | | | $ | 21.84 | | | $ | 22.29 | | | $ | 24.90 | | | $ | 30.69 | |
|
Total Return | | | 18.11 | % | | | (2.02 | %) | | | (10.48 | %) | | | (18.87 | %) | | | (0.07 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,488 | | | $ | 769 | | | $ | 509 | | | $ | 606 | | | $ | 2,680 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.65 | % | | | 0.61 | % | | | (0.39 | %) | | | (1.10 | %) | | | (1.32 | %) |
Total expensesc | | | 1.78 | % | | | 1.77 | % | | | 1.68 | % | | | 1.67 | % | | | 1.65 | % |
Net expensesd | | | 1.70 | % | | | 1.75 | % | | | 1.68 | % | | | 1.67 | % | | | 1.65 | % |
Portfolio turnover rate | | | — | | | | 48 | % | | | 37 | % | | | 120 | % | | | 199 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
f | Less than $0.01 per share. |
g | Less than $1,000 in Net Assets. |
h | Less than 0.01%. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark for small-cap securities on a daily basis. The Fund’s current benchmark is 150% of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Russell 2000® 1.5x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 150% of the daily price movement of the Russell 2000 Index.
Russell 2000® 1.5x Strategy Fund H-Class returned -38.46%, while the Russell 2000 Index returned -23.99% over the same time period.
No sector contributed to the return of the underlying index for the period. The sectors detracting the most were Financials, Consumer Discretionary, and Industrials.
The holdings in the Fund contributing the most to return of the underlying index were Teladoc Health, Inc., Array BioPharma, Inc., and Medicines Co. The holdings detracting the most were Green Dot Corp. Class A, Investor Mortgage Capital, Inc., and Blackstone Mortgage Trust, Inc. Class A.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
88 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | March 31, 2004 |
C-Class | January 23, 2001 |
H-Class | November 1, 2000 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Cumulative Fund Performance*
Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund II | 4.8% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 4.7% |
Total | 9.5% |
| | |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (38.45%) | (4.28%) | 6.38% |
A-Class Shares with sales charge‡ | (41.37%) | (5.20%) | 5.86% |
C-Class Shares | (38.93%) | (4.99%) | 5.58% |
C-Class Shares with CDSC§ | (39.54%) | (4.99%) | 5.58% |
H-Class Shares | (38.46%) | (4.31%) | 6.35% |
Russell 2000 Index | (23.99%) | 1.55% | 8.55% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 89 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND | |
| | Shares | | | Value | |
RIGHTS†††,1 - 0.0% |
| | | | | | | | | |
Consumer, Non-cyclical - 0.0% | | | | | | | | |
Tobira Therapeutics, Inc.* | | | 14 | | | $ | — | |
Omthera Pharmaceuticals, Inc.* | | | 57 | | | | — | |
Total Consumer, Non-cyclical | | | | | | | — | |
| | | | | | | | | |
Communications - 0.0% | | | | | | | | |
Nexstar Media Group, Inc.* | | | 85 | | | | — | |
| | | | | | | | | |
Basic Materials - 0.0% | | | | | | | | |
A Schulman, Inc.* | | | 44 | | | | — | |
| | | | | | | | | |
Total Rights | | | | | | | | |
(Cost $—) | | | | | | | — | |
| | | | | | | | | |
MUTUAL FUNDS† - 9.5% |
Guggenheim Strategy Fund II2 | | | 8,525 | | | | 205,017 | |
Guggenheim Ultra Short Duration Fund — Institutional Class2 | | | 20,957 | | | | 204,752 | |
Total Mutual Funds | | | | |
(Cost $410,781) | | | | | | | 409,769 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 43.5% |
Federal Farm Credit Bank |
0.40% (U.S. Prime Rate - 2.85%, Rate Floor: 0.00%) due 08/30/223 | | $ | 1,000,000 | | | | 1,003,419 | |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/223 | | | 250,000 | | | | 250,551 | |
0.32% (U.S. Prime Rate - 2.94%, Rate Floor: 0.00%) due 10/30/203 | | | 100,000 | | | | 100,042 | |
Federal Home Loan Bank |
1.77% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 01/04/213 | | | 525,000 | | | | 524,804 | |
Total Federal Agency Notes | | | | |
(Cost $1,874,661) | | | | | | | 1,878,816 | |
| U.S. TREASURY BILLS††- 1.0% |
| U.S. Treasury Bills |
0.50% due 04/30/204,5 | | | 44,000 | | | | 43,998 | |
| Total U.S. Treasury Bills | | | | | | | | |
| (Cost $43,982) | | | | | | | 43,998 | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS††,6- 22.0% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/207 | | | 685,200 | | | | 685,200 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/207 | | | 263,538 | | | | 263,538 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $948,738) | | | | | | | 948,738 | |
| | | | | | | | | |
| Total Investments - 76.0% | | | | | | | | |
| (Cost $3,278,162) | | | | | | $ | 3,281,321 | |
| Other Assets & Liabilities, net - 24.0% | | | | | | | 1,034,818 | |
| Total Net Assets - 100.0% | | | | | | $ | 4,316,139 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
Russell 2000 Index Mini Futures Contracts | | | 40 | | | | Jun 2020 | | | $ | 2,298,400 | | | $ | 80,238 | |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
OTC Equity Index Swap Agreements†† |
Barclays Bank plc | Russell 2000 Index | 0.59% (1 Week USD LIBOR) | At Maturity | | | 04/30/20 | | | | 2,857 | | | $ | 3,294,103 | | | $ | 122,150 | |
BNP Paribas | Russell 2000 Index | 1.09% (1 Month USD LIBOR + 0.10%) | At Maturity | | | 04/29/20 | | | | 291 | | | | 336,110 | | | | (7,932 | ) |
Goldman Sachs International | Russell 2000 Index | 0.84% (1 Week USD LIBOR + 0.25%) | At Maturity | | | 04/28/20 | | | | 529 | | | | 609,952 | | | | (11,563 | ) |
| | | | | | | | | | | | | | $ | 4,240,165 | | | $ | 102,655 | |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at March 31, 2020. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
2 | Affiliated issuer. |
3 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
5 | Rate indicated is the effective yield at the time of purchase. |
6 | Repurchase Agreements — See Note 6. |
7 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Rights | | $ | — | | | $ | — | | | $ | — | * | | $ | — | |
Mutual Funds | | | 409,769 | | | | — | | | | — | | | | 409,769 | |
Federal Agency Notes | | | — | | | | 1,878,816 | | | | — | | | | 1,878,816 | |
U.S. Treasury Bills | | | — | | | | 43,998 | | | | — | | | | 43,998 | |
Repurchase Agreements | | | — | | | | 948,738 | | | | — | | | | 948,738 | |
Equity Futures Contracts** | | | 80,238 | | | | — | | | | — | | | | 80,238 | |
Equity Index Swap Agreements** | | | — | | | | 122,150 | | | | — | | | | 122,150 | |
Total Assets | | $ | 490,007 | | | $ | 2,993,702 | | | $ | — | | | $ | 3,483,709 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 19,495 | | | $ | — | | | $ | 19,495 | |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 2,489,544 | | | $ | 2,975,000 | | | $ | (5,250,000 | ) | | $ | (24,604 | ) | | $ | 15,077 | | | $ | 205,017 | | | | 8,525 | | | $ | 57,427 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 2,498,319 | | | | 1,315,000 | | | | (3,600,000 | ) | | | (16,818 | ) | | | 8,251 | | | | 204,752 | | | | 20,957 | | | | 56,396 | |
| | | $ | 4,987,863 | | | $ | 4,290,000 | | | $ | (8,850,000 | ) | | $ | (41,422 | ) | | $ | 23,328 | | | $ | 409,769 | | | | | | | $ | 113,823 | |
92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 1.5x STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $1,918,643) | | $ | 1,922,814 | |
Investments in affiliated issuers, at value (cost $410,781) | | | 409,769 | |
Repurchase agreements, at value (cost $948,738) | | | 948,738 | |
Cash | | | 647,225 | |
Segregated cash with broker | | | 262,956 | |
Unrealized appreciation on OTC swap agreements | | | 122,150 | |
Receivables: |
Swap settlement | | | 35,760 | |
Interest | | | 3,473 | |
Dividends | | | 2,939 | |
Total assets | | | 4,355,824 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 19,495 | |
Payable for: |
Management fees | | | 3,543 | |
Fund shares redeemed | | | 2,653 | |
Licensing fees | | | 2,340 | |
Transfer agent and administrative fees | | | 1,429 | |
Variation margin on futures contracts | | | 1,368 | |
Distribution and service fees | | | 1,059 | |
Portfolio accounting fees | | | 417 | |
Trustees’ fees* | | | 105 | |
Miscellaneous | | | 7,276 | |
Total liabilities | | | 39,685 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 4,316,139 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 4,244,980 | |
Total distributable earnings (loss) | | | 71,159 | |
Net assets | | $ | 4,316,139 | |
| | | | | |
A-Class: |
Net assets | | $ | 947,500 | |
Capital shares outstanding | | | 24,196 | |
Net asset value per share | | $ | 39.16 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 41.11 | |
| | | | | |
C-Class: |
Net assets | | $ | 21,762 | |
Capital shares outstanding | | | 660 | |
Net asset value per share | | $ | 32.98 | |
| | | | | |
H-Class: |
Net assets | | $ | 3,346,877 | |
Capital shares outstanding | | | 85,815 | |
Net asset value per share | | $ | 39.00 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of unaffiliated issuers | | $ | 889 | |
Dividends from securities of affiliated issuers | | | 113,823 | |
Interest | | | 158,717 | |
Income from securities lending, net | | | 28 | |
Total investment income | | | 273,457 | |
| | | | | |
Expenses: |
Management fees | | | 124,215 | |
Distribution and service fees: |
A-Class | | | 4,729 | |
C-Class | | | 523 | |
H-Class | | | 29,644 | |
Transfer agent and administrative fees | | | 34,890 | |
Portfolio accounting fees | | | 13,802 | |
Registration fees | | | 11,372 | |
Licensing fees | | | 6,917 | |
Professional fees | | | 6,044 | |
Printing fees | | | 3,183 | |
Trustees’ fees* | | | 2,773 | |
Custodian fees | | | 2,323 | |
Prime broker interest expense | | | 160 | |
Line of credit fees | | | 42 | |
Miscellaneous | | | 13,079 | |
Total expenses | | | 253,696 | |
Less: |
Expenses waived by Adviser | | | (5,939 | ) |
Net expenses | | | 247,757 | |
Net investment income | | | 25,700 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 179,906 | |
Investments in affiliated issuers | | | (41,422 | ) |
Swap agreements | | | (366,992 | ) |
Futures contracts | | | 128,719 | |
Net realized loss | | | (99,789 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (175,961 | ) |
Investments in affiliated issuers | | | 23,328 | |
Swap agreements | | | (7,443 | ) |
Futures contracts | | | 80,238 | |
Net change in unrealized appreciation (depreciation) | | | (79,838 | ) |
Net realized and unrealized loss | | | (179,627 | ) |
Net decrease in net assets resulting from operations | | $ | (153,927 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 93 |
RUSSELL 2000® 1.5x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 25,700 | | | $ | 69,654 | |
Net realized gain (loss) on investments | | | (99,789 | ) | | | 3,050,875 | |
Net change in unrealized appreciation (depreciation) on investments | | | (79,838 | ) | | | 4,139 | |
Net increase (decrease) in net assets resulting from operations | | | (153,927 | ) | | | 3,124,668 | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 193,205 | | | | 1,275,564 | |
C-Class | | | 11,734 | | | | 4,788,055 | |
H-Class | | | 212,569,841 | | | | 262,178,295 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (674,399 | ) | | | (454,972 | ) |
C-Class | | | (54,294 | ) | | | (5,865,534 | ) |
H-Class | | | (216,394,438 | ) | | | (265,822,852 | ) |
Net decrease from capital share transactions | | | (4,348,351 | ) | | | (3,901,444 | ) |
Net decrease in net assets | | | (4,502,278 | ) | | | (776,776 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 8,818,417 | | | | 9,595,193 | |
End of year | | $ | 4,316,139 | | | $ | 8,818,417 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 3,369 | | | | 17,655 | |
C-Class | | | 210 | | | | 77,413 | |
H-Class | | | 3,198,054 | | | | 4,300,372 | |
Shares redeemed | | | | | | | | |
A-Class | | | (11,618 | ) | | | (6,912 | ) |
C-Class | | | (995 | ) | | | (94,418 | ) |
H-Class | | | (3,217,593 | ) | | | (4,306,790 | ) |
Net decrease in shares | | | (28,573 | ) | | | (12,680 | ) |
94 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 1.5x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 63.62 | | | $ | 64.49 | | | $ | 55.99 | | | $ | 44.78 | | | $ | 58.05 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .32 | | | | .34 | | | | .02 | | | | (.32 | ) | | | (.43 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (24.78 | ) | | | (1.21 | )e | | | 8.48 | | | | 16.87 | | | | (9.03 | ) |
Total from investment operations | | | (24.46 | ) | | | (.87 | ) | | | 8.50 | | | | 16.55 | | | | (9.46 | ) |
Less distributions from: |
Net realized gains | | | — | | | | — | | | | — | | | | (5.34 | ) | | | (3.81 | ) |
Total distributions | | | — | | | | — | | | | — | | | | (5.34 | ) | | | (3.81 | ) |
Net asset value, end of period | | $ | 39.16 | | | $ | 63.62 | | | $ | 64.49 | | | $ | 55.99 | | | $ | 44.78 | |
|
Total Returnb | | | (38.45 | %) | | | (1.35 | %) | | | 15.18 | % | | | 38.01 | % | | | (16.75 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 948 | | | $ | 2,064 | | | $ | 1,400 | | | $ | 1,172 | | | $ | 497 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.50 | % | | | 0.52 | % | | | 0.03 | % | | | (0.62 | %) | | | (0.85 | %) |
Total expensesc | | | 1.82 | % | | | 1.80 | % | | | 1.72 | % | | | 1.73 | % | | | 1.70 | % |
Net expensesd | | | 1.76 | % | | | 1.78 | % | | | 1.72 | % | | | 1.73 | % | | | 1.70 | % |
Portfolio turnover rate | | | 93 | % | | | 258 | % | | | 580 | % | | | 1,315 | % | | | 971 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 54.00 | | | $ | 55.14 | | | $ | 48.24 | | | $ | 39.44 | | | $ | 52.01 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.12 | ) | | | (.30 | ) | | | (.40 | ) | | | (.63 | ) | | | (.73 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (20.90 | ) | | | (.84 | )e | | | 7.30 | | | | 14.77 | | | | (8.03 | ) |
Total from investment operations | | | (21.02 | ) | | | (1.14 | ) | | | 6.90 | | | | 14.14 | | | | (8.76 | ) |
Less distributions from: |
Net realized gains | | | — | | | | — | | | | — | | | | (5.34 | ) | | | (3.81 | ) |
Total distributions | | | — | | | | — | | | | — | | | | (5.34 | ) | | | (3.81 | ) |
Net asset value, end of period | | $ | 32.98 | | | $ | 54.00 | | | $ | 55.14 | | | $ | 48.24 | | | $ | 39.44 | |
|
Total Returnb | | | (38.93 | %) | | | (2.07 | %) | | | 14.30 | % | | | 36.98 | % | | | (17.36 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 22 | | | $ | 78 | | | $ | 1,017 | | | $ | 1,494 | | | $ | 1,322 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.22 | %) | | | (0.50 | %) | | | (0.78 | %) | | | (1.41 | %) | | | (1.62 | %) |
Total expensesc | | | 2.57 | % | | | 2.54 | % | | | 2.48 | % | | | 2.47 | % | | | 2.45 | % |
Net expensesd | | | 2.51 | % | | | 2.53 | % | | | 2.48 | % | | | 2.47 | % | | | 2.45 | % |
Portfolio turnover rate | | | 93 | % | | | 258 | % | | | 580 | % | | | 1,315 | % | | | 971 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
RUSSELL 2000® 1.5x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 63.37 | | | $ | 64.22 | | | $ | 55.86 | | | $ | 44.75 | | | $ | 57.94 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .09 | | | | .29 | | | | (.11 | ) | | | (.51 | ) | | | (.51 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (24.46 | ) | | | (1.14 | )e | | | 8.47 | | | | 16.96 | | | | (8.87 | ) |
Total from investment operations | | | (24.37 | ) | | | (.85 | ) | | | 8.36 | | | | 16.45 | | | | (9.38 | ) |
Less distributions from: |
Net realized gains | | | — | | | | — | | | | — | | | | (5.34 | ) | | | (3.81 | ) |
Total distributions | | | — | | | | — | | | | — | | | | (5.34 | ) | | | (3.81 | ) |
Net asset value, end of period | | $ | 39.00 | | | $ | 63.37 | | | $ | 64.22 | | | $ | 55.86 | | | $ | 44.75 | |
|
Total Return | | | (38.46 | %) | | | (1.32 | %) | | | 14.97 | % | | | 37.80 | % | | | (16.63 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,347 | | | $ | 6,676 | | | $ | 7,178 | | | $ | 8,447 | | | $ | 8,049 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.14 | % | | | 0.46 | % | | | (0.18 | %) | | | (0.98 | %) | | | (1.01 | %) |
Total expensesc | | | 1.84 | % | | | 1.81 | % | | | 1.72 | % | | | 1.73 | % | | | 1.70 | % |
Net expensesd | | | 1.80 | % | | | 1.80 | % | | | 1.72 | % | | | 1.73 | % | | | 1.70 | % |
Portfolio turnover rate | | | 93 | % | | | 258 | % | | | 580 | % | | | 1,315 | % | | | 971 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The amount shown for a share outstanding throughout the period does not accord with the aggregate net gains on investments for the year because of the sales and repurchases of Fund shares in relation to fluctuating market value of the investments of the Fund. |
96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
RUSSELL 2000® FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the Russell 2000® Index (the “underlying index”).
For the one-year period ended March 31, 2020, Russell 2000® Fund maintained a daily correlation of over 99% to its benchmark of the daily price movement of the Russell 2000 Index.
Russell 2000® Fund H-Class returned -25.30%, while the Russell 2000 Index returned -23.99% over the same time period.
No sector contributed to the return of the underlying index for the period. The sectors detracting the most were Financials, Consumer Discretionary, and Industrials.
The holdings in the Fund contributing the most to return of the underlying index were Teladoc Health, Inc., Array BioPharma, Inc., and Medicines Co. The holdings detracting the most were Green Dot Corp. Class A, Investor Mortgage Capital, Inc., and Blackstone Mortgage Trust, Inc. Class A.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Dates: |
A-Class | May 31, 2006 |
C-Class | May 31, 2006 |
H-Class | May 31, 2006 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| | THE RYDEX FUNDS ANNUAL REPORT | 97 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (25.32%) | (1.98%) | 5.21% |
A-Class Shares with sales charge‡ | (28.86%) | (2.93%) | 4.71% |
C-Class Shares | (25.88%) | (2.70%) | 4.39% |
C-Class Shares with CDSC§ | (26.61%) | (2.70%) | 4.39% |
H-Class Shares | (25.30%) | (1.97%) | 5.20% |
Russell 2000 Index | (23.99%) | 1.55% | 8.55% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
98 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
RUSSELL 2000® FUND | |
| | Shares | | | Value | |
RIGHTS†††,1 - 0.0% |
| | | | | | | | | |
Consumer, Non-cyclical - 0.0% | | | | | | | | |
Elanco Animal Health, Inc.* | | | 505 | | | $ | — | |
Tobira Therapeutics, Inc.* | | | 141 | | | | — | |
Omthera Pharmaceuticals, Inc.* | | | 86 | | | | — | |
Oncternal Therapeutics, Inc.* | | | 7 | | | | — | |
Total Consumer, Non-cyclical | | | | | | | — | |
| | | | | | | | | |
Communications - 0.0% | | | | | | | | |
Nexstar Media Group, Inc.* | | | 2,530 | | | | — | |
| | | | | | | | | |
Basic Materials - 0.0% | | | | | | | | |
A Schulman, Inc.* | | | 408 | | | | — | |
| | | | | | | | | |
Total Rights | | | | | | | | |
(Cost $104) | | | | | | | — | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 59.3% |
Federal Farm Credit Bank |
0.38% (3 Month U.S. Treasury Bill Rate + 0.29%, Rate Floor: 0.00%) due 04/11/222 | | $ | 4,300,000 | | | | 4,292,964 | |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | | | 4,000,000 | | | | 4,008,818 | |
0.40% (U.S. Prime Rate - 2.85%, Rate Floor: 0.00%) due 08/30/222 | | | 1,000,000 | | | | 1,003,419 | |
Freddie Mac |
0.14% (U.S. Secured Overnight Financing Rate + 0.13%, Rate Floor: 0.00%) due 08/05/222 | | | 2,000,000 | | | | 1,987,230 | |
Total Federal Agency Notes | | | | |
(Cost $11,300,000) | | | | | | | 11,292,431 | |
| U.S. TREASURY BILLS††- 1.2% |
| U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 225,000 | | | | 224,990 | |
| Total U.S. Treasury Bills | | | | | | | | |
| (Cost $224,908) | | | | | | | 224,990 | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS††,5- 22.1% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | | 3,035,047 | | | | 3,035,047 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 1,167,326 | | | | 1,167,326 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $4,202,373) | | | | | | | 4,202,373 | |
| | | | | | | | | |
| Total Investments - 82.6% | | | | | | | | |
| (Cost $15,727,385) | | | | | | $ | 15,719,794 | |
| Other Assets & Liabilities, net - 17.4% | | | | | | | 3,313,812 | |
| Total Net Assets - 100.0% | | | | | | $ | 19,033,606 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
Russell 2000 Index Mini Futures Contracts | | | 100 | | | | Jun 2020 | | | $ | 5,746,000 | | | $ | 164,076 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
OTC Equity Index Swap Agreements†† |
Barclays Bank plc | Russell 2000 Index | 0.59% (1 Week USD LIBOR) | At Maturity | | | 04/30/20 | | | | 10,200 | | | $ | 11,761,573 | | | $ | 436,135 | |
Goldman Sachs International | Russell 2000 Index | 0.84% (1 Week USD LIBOR + 0.25%) | At Maturity | | | 04/28/20 | | | | 732 | | | | 844,099 | | | | (9,508 | ) |
BNP Paribas | Russell 2000 Index | 1.09% (I Month USD LIBOR + 0.10%) | At Maturity | | | 04/29/20 | | | | 910 | | | | 1,049,718 | | | | (18,899 | ) |
| | | | | | | | | | | | | | $ | 13,655,390 | | | $ | 407,728 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 99 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
RUSSELL 2000® FUND | |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at March 31, 2020. The total market value of fair valued securities amounts to $0, (cost $104) or 0.0% of total net assets. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Rights | | $ | — | | | $ | — | | | $ | — | * | | $ | — | |
Federal Agency Notes | | | — | | | | 11,292,431 | | | | — | | | | 11,292,431 | |
U.S. Treasury Bills | | | — | | | | 224,990 | | | | — | | | | 224,990 | |
Repurchase Agreements | | | — | | | | 4,202,373 | | | | — | | | | 4,202,373 | |
Equity Futures Contracts** | | | 164,076 | | | | — | | | | — | | | | 164,076 | |
Equity Index Swap Agreements** | | | — | | | | 436,135 | | | | — | | | | 436,135 | |
Total Assets | | $ | 164,076 | | | $ | 16,155,929 | | | $ | — | | | $ | 16,320,005 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 28,407 | | | $ | — | | | $ | 28,407 | |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments, at value (cost $11,525,012) | | $ | 11,517,421 | |
Repurchase agreements, at value (cost $4,202,373) | | | 4,202,373 | |
Cash | | | 2,753,872 | |
Segregated cash with broker | | | 794,780 | |
Unrealized appreciation on OTC swap agreements | | | 436,135 | |
Receivables: |
Fund shares sold | | | 81,245 | |
Interest | | | 19,824 | |
Total assets | | | 19,805,650 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 28,407 | |
Payable for: |
Fund shares redeemed | | | 585,817 | |
Swap settlement | | | 81,665 | |
Management fees | | | 14,839 | |
Transfer agent and administrative fees | | | 6,293 | |
Distribution and service fees | | | 6,079 | |
Variation margin on futures contracts | | | 5,679 | |
Portfolio accounting fees | | | 2,968 | |
Trustees’ fess* | | | 558 | |
Miscellaneous | | | 39,739 | |
Total liabilities | | | 772,044 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 19,033,606 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 26,821,954 | |
Total distributable earnings (loss) | | | (7,788,348 | ) |
Net assets | | $ | 19,033,606 | |
| | | | | |
A-Class: |
Net assets | | $ | 10,712,315 | |
Capital shares outstanding | | | 332,230 | |
Net asset value per share | | $ | 32.24 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 33.85 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,590,210 | |
Capital shares outstanding | | | 55,789 | |
Net asset value per share | | $ | 28.50 | |
| | | | | |
H-Class: |
Net assets | | $ | 6,731,081 | |
Capital shares outstanding | | | 209,216 | |
Net asset value per share | | $ | 32.17 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $31) | | $ | 105,483 | |
Interest | | | 503,630 | |
Income from securities lending, net | | | 3,791 | |
Total investment income | | | 612,904 | |
| | | | | |
Expenses: |
Management fees | | | 265,158 | |
Distribution and service fees: |
A-Class | | | 42,919 | |
C-Class | | | 27,435 | |
H-Class | | | 38,613 | |
Transfer agent and administrative fees | | | 89,735 | |
Portfolio accounting fees | | | 53,034 | |
Registration fees | | | 33,245 | |
Professional fees | | | 16,182 | |
Trustees’ fees* | | | 8,734 | |
Custodian fees | | | 5,250 | |
Line of credit fees | | | 62 | |
Miscellaneous | | | 50,403 | |
Total expenses | | | 630,770 | |
Net investment income | | | (17,866 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 4,051,561 | |
Swap agreements | | | (6,401,286 | ) |
Futures contracts | | | (1,873,212 | ) |
Net realized loss | | | (4,222,937 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (4,306,894 | ) |
Swap agreements | | | 250,797 | |
Futures contracts | | | 162,079 | |
Net change in unrealized appreciation (depreciation) | | | (3,894,018 | ) |
Net realized and unrealized loss | | | (8,116,955 | ) |
Net decrease in net assets resulting from operations | | $ | (8,134,821 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 101 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income (loss) | | $ | (17,866 | ) | | $ | (98,815 | ) |
Net realized loss on investments | | | (4,222,937 | ) | | | (652,459 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (3,894,018 | ) | | | (455,050 | ) |
Net decrease in net assets resulting from operations | | | (8,134,821 | ) | | | (1,206,324 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (245,858 | ) | | | — | |
C-Class | | | (43,126 | ) | | | — | |
H-Class | | | (276,721 | ) | | | — | |
Total distributions to shareholders | | | (565,705 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 3,057,098 | | | | 148,474,143 | |
C-Class | | | 815,695 | | | | 10,124,276 | |
H-Class | | | 178,802,664 | | | | 128,775,760 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 241,990 | | | | — | |
C-Class | | | 36,271 | | | | — | |
H-Class | | | 274,144 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (7,262,452 | ) | | | (145,526,441 | ) |
C-Class | | | (1,845,375 | ) | | | (12,203,764 | ) |
H-Class | | | (187,602,791 | ) | | | (134,374,234 | ) |
Net decrease from capital share transactions | | | (13,482,756 | ) | | | (4,730,260 | ) |
Net decrease in net assets | | | (22,183,282 | ) | | | (5,936,584 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 41,216,888 | | | | 47,153,472 | |
End of year | | $ | 19,033,606 | | | $ | 41,216,888 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 73,128 | | | | 3,091,191 | |
C-Class | | | 21,433 | | | | 255,282 | |
H-Class | | | 4,120,156 | | | | 2,863,744 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 5,216 | | | | — | |
C-Class | | | 883 | | | | — | |
H-Class | | | 5,922 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (169,984 | ) | | | (3,060,305 | ) |
C-Class | | | (50,018 | ) | | | (306,208 | ) |
H-Class | | | (4,360,424 | ) | | | (2,987,447 | ) |
Net decrease in shares | | | (353,688 | ) | | | (143,743 | ) |
102 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 43.81 | | | $ | 43.67 | | | $ | 41.61 | | | $ | 33.56 | | | $ | 38.88 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .00 | | | | (.05 | ) | | | (.17 | ) | | | (.21 | ) | | | (.29 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.89 | ) | | | .19 | c | | | 4.34 | | | | 8.26 | | | | (4.12 | ) |
Total from investment operations | | | (10.89 | ) | | | .14 | | | | 4.17 | | | | 8.05 | | | | (4.41 | ) |
Less distributions from: |
Net investment income | | | (.01 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | (.67 | ) | | | — | | | | (2.11 | ) | | | — | | | | (.91 | ) |
Total distributions | | | (.68 | ) | | | — | | | | (2.11 | ) | | | — | | | | (.91 | ) |
Net asset value, end of period | | $ | 32.24 | | | $ | 43.81 | | | $ | 43.67 | | | $ | 41.61 | | | $ | 33.56 | |
|
Total Returnb | | | (25.32 | %) | | | 0.32 | % | | | 10.03 | % | | | 23.96 | % | | | (11.43 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 10,712 | | | $ | 18,569 | | | $ | 17,163 | | | $ | 14,650 | | | $ | 11,993 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.00 | % | | | (0.11 | %) | | | (0.40 | %) | | | (0.54 | %) | | | (0.83 | %) |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.62 | % | | | 1.59 | % |
Portfolio turnover rate | | | 35 | % | | | 112 | % | | | 167 | % | | | 203 | % | | | 442 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 39.09 | | | $ | 39.26 | | | $ | 37.87 | | | $ | 30.78 | | | $ | 36.00 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.29 | ) | | | (.37 | ) | | | (.45 | ) | | | (.44 | ) | | | (.51 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (9.62 | ) | | | .20 | c | | | 3.95 | | | | 7.53 | | | | (3.80 | ) |
Total from investment operations | | | (9.91 | ) | | | (.17 | ) | | | 3.50 | | | | 7.09 | | | | (4.31 | ) |
Less distributions from: |
Net investment income | | | (.01 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | (.67 | ) | | | — | | | | (2.11 | ) | | | — | | | | (.91 | ) |
Total distributions | | | (.68 | ) | | | — | | | | (2.11 | ) | | | — | | | | (.91 | ) |
Net asset value, end of period | | $ | 28.50 | | | $ | 39.09 | | | $ | 39.26 | | | $ | 37.87 | | | $ | 30.78 | |
|
Total Returnb | | | (25.88 | %) | | | (0.43 | %) | | | 9.21 | % | | | 23.03 | % | | | (12.07 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,590 | | | $ | 3,264 | | | $ | 5,277 | | | $ | 5,841 | | | $ | 2,760 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.74 | %) | | | (0.91 | %) | | | (1.16 | %) | | | (1.27 | %) | | | (1.56 | %) |
Total expenses | | | 2.48 | % | | | 2.46 | % | | | 2.38 | % | | | 2.38 | % | | | 2.35 | % |
Portfolio turnover rate | | | 35 | % | | | 112 | % | | | 167 | % | | | 203 | % | | | 442 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 103 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 43.70 | | | $ | 43.57 | | | $ | 41.51 | | | $ | 33.48 | | | $ | 38.79 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .01 | | | | (.06 | ) | | | (.19 | ) | | | (.21 | ) | | | (.35 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.86 | ) | | | .19 | c | | | 4.36 | | | | 8.24 | | | | (4.05 | ) |
Total from investment operations | | | (10.85 | ) | | | .13 | | | | 4.17 | | | | 8.03 | | | | (4.40 | ) |
Less distributions from: |
Net investment income | | | (.01 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | (.67 | ) | | | — | | | | (2.11 | ) | | | — | | | | (.91 | ) |
Total distributions | | | (.68 | ) | | | — | | | | (2.11 | ) | | | — | | | | (.91 | ) |
Net asset value, end of period | | $ | 32.17 | | | $ | 43.70 | | | $ | 43.57 | | | $ | 41.51 | | | $ | 33.48 | |
|
Total Return | | | (25.30 | %) | | | 0.30 | % | | | 10.03 | % | | | 23.95 | % | | | (11.43 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 6,731 | | | $ | 19,384 | | | $ | 24,713 | | | $ | 29,466 | | | $ | 46,251 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.01 | % | | | (0.14 | %) | | | (0.43 | %) | | | (0.54 | %) | | | (0.97 | %) |
Total expenses | | | 1.73 | % | | | 1.71 | % | | | 1.63 | % | | | 1.63 | % | | | 1.60 | % |
Portfolio turnover rate | | | 35 | % | | | 112 | % | | | 167 | % | | | 203 | % | | | 442 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | The amount shown for a share outstanding throughout the periods does not accord with the aggregate net losses on investments for the year because of the sales and repurchases of Fund shares in relation to fluctuating market value of the investments of the Fund. |
104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INVERSE RUSSELL 2000® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Inverse Russell 2000® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the Russell 2000 Index.
Inverse Russell 2000® Strategy Fund H-Class returned 19.08%, while the Russell 2000 Index returned -23.99% over the same time period.
No sector contributed to the return of the underlying index for the period. The sectors detracting the most were Financials, Consumer Discretionary, and Industrials.
The holdings in the Fund contributing the most to return of the underlying index were Teladoc Health, Inc., Array BioPharma, Inc., and Medicines Co. The holdings detracting the most were Green Dot Corp. Class A, Investor Mortgage Capital, Inc., and Blackstone Mortgage Trust, Inc. Class A.
Derivatives in the Fund were used to help provide inverse exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
| | THE RYDEX FUNDS ANNUAL REPORT | 105 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | March 31, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Cumulative Fund Performance*
Largest Holdings (% of Total Net Assets) |
Guggenheim Ultra Short Duration Fund — Institutional Class | 4.7% |
Guggenheim Strategy Fund II | 3.7% |
Total | 8.4% |
| | |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 19.00% | (3.62%) | (11.34%) |
A-Class Shares with sales charge‡ | 13.33% | (4.56%) | (11.78%) |
C-Class Shares | 18.22% | (4.33%) | (11.99%) |
C-Class Shares with CDSC§ | 17.22% | (4.33%) | (11.99%) |
H-Class Shares | 19.08% | (3.59%) | (11.31%) |
Russell 2000 Index | (23.99%) | 1.55% | 8.55% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
106 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE RUSSELL 2000® STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 8.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 109,410 | | | $ | 1,068,939 | |
Guggenheim Strategy Fund II1 | | | 34,379 | | | | 826,823 | |
Total Mutual Funds | | | | |
(Cost $1,936,333) | | | | | | | 1,895,762 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY DISCOUNT NOTES†† - 48.4% |
Federal Home Loan Bank |
0.05% due 04/08/202 | | $ | 5,000,000 | | | | 4,999,951 | |
0.51% due 08/03/202 | | | 5,000,000 | | | | 4,998,106 | |
0.40% due 05/08/202 | | | 1,000,000 | | | | 999,589 | |
Total Federal Agency Discount Notes | | | | |
(Cost $10,990,585) | | | | | | | 10,997,646 | |
| | | | | | | | | |
FEDERAL AGENCY NOTES†† - 2.3% |
Federal Home Loan Bank |
0.75% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 12/18/203 | | | 400,000 | | | | 400,084 | |
Federal Farm Credit Bank |
0.44% (U.S. Prime Rate - 2.81%, Rate Floor: 0.00%) due 05/20/223 | | | 120,000 | | | | 120,261 | |
Total Federal Agency Notes | | | | |
(Cost $519,848) | | | | | | | 520,345 | |
| | | | | | | | | |
| U.S. TREASURY BILLS††- 0.0% |
| U.S. Treasury Bills |
0.50% due 04/30/202 | | | 5,000 | | | | 5,000 | |
| Total U.S. Treasury Bills | | | | | | | | |
| (Cost $4,998) | | | | | | | 5,000 | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS††,4- 24.9% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/205 | | | 4,091,107 | | | | 4,091,107 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/205 | | | 1,573,503 | | | | 1,573,503 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $5,664,610) | | | | | | | 5,664,610 | |
| | | | | | | | | |
| Total Investments - 84.0% | | | | | | | | |
| (Cost $19,116,374) | | | | | | $ | 19,083,363 | |
| Other Assets & Liabilities, net - 16.0% | | | | | | | 3,630,737 | |
| Total Net Assets - 100.0% | | | | | | $ | 22,714,100 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Receive | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation | |
OTC Equity Index Swap Agreements Sold Short†† |
Goldman Sachs International | Russell 2000 Index | (0.54)% (1 Week USD LIBOR - 0.05%) | At Maturity | | | 04/28/20 | | | | 10,866 | | | $ | 12,530,100 | | | $ | 287,918 | |
BNP Paribas | Russell 2000 Index | (0.59)% (1 Month USD LIBOR - 0.40%) | At Maturity | | | 04/29/20 | | | | 6,096 | | | | 7,029,779 | | | | 142,224 | |
Barclays Bank plc | Russell 2000 Index | (0.09)% (1 Week USD LIBOR - 0.50%) | At Maturity | | | 04/30/20 | | | | 2,713 | | | | 3,128,456 | | | | 14,147 | |
| | | | | | | | | | | | | | $ | 22,688,335 | | | $ | 444,289 | |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INVERSE RUSSELL 2000® STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 1,895,762 | | | $ | — | | | $ | — | | | $ | 1,895,762 | |
Federal Agency Discount Notes | | | — | | | | 10,997,646 | | | | — | | | | 10,997,646 | |
Federal Agency Notes | | | — | | | | 520,345 | | | | — | | | | 520,345 | |
U.S. Treasury Bills | | | — | | | | 5,000 | | | | — | | | | 5,000 | |
Repurchase Agreements | | | — | | | | 5,664,610 | | | | — | | | | 5,664,610 | |
Equity Index Swap Agreements** | | | — | | | | 444,289 | | | | — | | | | 444,289 | |
Total Assets | | $ | 1,895,762 | | | $ | 17,631,890 | | | $ | — | | | $ | 19,527,652 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 1,252,629 | | | $ | — | | | $ | (400,000 | ) | | $ | (11 | ) | | $ | (25,795 | ) | | $ | 826,823 | | | | 34,379 | | | $ | 25,386 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 1,347,072 | | | | 140,000 | | | | (400,000 | ) | | | (493 | ) | | | (17,640 | ) | | | 1,068,939 | | | | 109,410 | | | | 24,759 | |
| | | $ | 2,599,701 | | | $ | 140,000 | | | $ | (800,000 | ) | | $ | (504 | ) | | $ | (43,435 | ) | | $ | 1,895,762 | | | | | | | $ | 50,145 | |
108 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $11,515,431) | | $ | 11,522,991 | |
Investments in affiliated issuers, at value (cost $1,936,333) | | | 1,895,762 | |
Repurchase agreements, at value (cost $5,664,610) | | | 5,664,610 | |
Cash | | | 3,042,186 | |
Unrealized appreciation on OTC swap agreements | | | 444,289 | |
Receivables: |
Fund shares sold | | | 315,278 | |
Dividends | | | 3,322 | |
Interest | | | 289 | |
Total assets | | | 22,888,727 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 81,608 | |
Swap settlement | | | 44,885 | |
Management fees | | | 13,243 | |
Transfer agent and administrative fees | | | 4,227 | |
Distribution and service fees | | | 3,884 | |
Portfolio accounting fees | | | 1,493 | |
Trustees’ fees* | | | 369 | |
Miscellaneous | | | 24,918 | |
Total liabilities | | | 174,627 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 22,714,100 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 50,269,472 | |
Total distributable earnings (loss) | | | (27,555,372 | ) |
Net assets | | $ | 22,714,100 | |
| | | | | |
A-Class: |
Net assets | | $ | 206,514 | |
Capital shares outstanding | | | 8,562 | |
Net asset value per share | | $ | 24.12 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 25.32 | |
| | | | | |
C-Class: |
Net assets | | $ | 93,642 | |
Capital shares outstanding | | | 4,387 | |
Net asset value per share | | $ | 21.35 | |
| | | | | |
H-Class: |
Net assets | | $ | 22,413,944 | |
Capital shares outstanding | | | 925,542 | |
Net asset value per share | | $ | 24.22 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 50,145 | |
Interest | | | 99,996 | |
Total investment income | | | 150,141 | |
| | | | | |
Expenses: |
Management fees | | | 70,910 | |
Distribution and service fees: |
A-Class | | | 1,058 | |
C-Class | | | 3,787 | |
H-Class | | | 17,692 | |
Transfer agent and administrative fees | | | 20,193 | |
Registration fees | | | 8,238 | |
Portfolio accounting fees | | | 7,879 | |
Professional fees | | | 4,904 | |
Trustees’ fees* | | | 2,063 | |
Custodian fees | | | 1,125 | |
Prime broker interest expense | | | 6 | |
Miscellaneous | | | 8,684 | |
Total expenses | | | 146,539 | |
Less: |
Expenses waived by Adviser | | | (2,538 | ) |
Net expenses | | | 144,001 | |
Net investment income | | | 6,140 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 2,081 | |
Investments in affiliated issuers | | | (504 | ) |
Swap agreements | | | (1,589,611 | ) |
Futures contracts | | | (253,463 | ) |
Net realized loss | | | (1,841,497 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 7,560 | |
Investments in affiliated issuers | | | (43,435 | ) |
Swap agreements | | | 555,378 | |
Futures contracts | | | 13,457 | |
Net change in unrealized appreciation (depreciation) | | | 532,960 | |
Net realized and unrealized loss | | | (1,308,537 | ) |
Net decrease in net assets resulting from operations | | $ | (1,302,397 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 109 |
INVERSE RUSSELL 2000® STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 6,140 | | | $ | 52,324 | |
Net realized loss on investments | | | (1,841,497 | ) | | | (42,797 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | 532,960 | | | | (174,046 | ) |
Net decrease in net assets resulting from operations | | | (1,302,397 | ) | | | (164,519 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (1,975 | ) | | | — | |
C-Class | | | (2,914 | ) | | | — | |
H-Class | | | (47,851 | ) | | | — | |
Total distributions to shareholders | | | (52,740 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 504,699 | | | | 5,160,677 | |
C-Class | | | 42,769 | | | | 5,873,034 | |
H-Class | | | 83,248,259 | | | | 97,798,195 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 1,705 | | | | — | |
C-Class | | | 2,557 | | | | — | |
H-Class | | | 47,493 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (1,102,154 | ) | | | (4,494,155 | ) |
C-Class | | | (512,240 | ) | | | (5,988,495 | ) |
H-Class | | | (68,762,044 | ) | | | (91,998,591 | ) |
Net increase from capital share transactions | | | 13,471,044 | | | | 6,350,665 | |
Net increase in net assets | | | 12,115,907 | | | | 6,186,146 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 10,598,193 | | | | 4,412,047 | |
End of year | | $ | 22,714,100 | | | $ | 10,598,193 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 24,623 | | | | 230,007 | |
C-Class | | | 2,041 | | | | 326,224 | |
H-Class | | | 3,778,954 | | | | 4,711,124 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 90 | | | | — | |
C-Class | | | 152 | | | | — | |
H-Class | | | 2,500 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (52,699 | ) | | | (205,975 | ) |
C-Class | | | (23,048 | ) | | | (333,306 | ) |
H-Class | | | (3,314,364 | ) | | | (4,421,740 | ) |
Net increase in shares | | | 418,249 | | | | 306,334 | |
110 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 20.42 | | | $ | 20.90 | | | $ | 23.62 | | | $ | 30.76 | | | $ | 29.22 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .10 | | | | .14 | | | | (.18 | ) | | | (.31 | ) | | | (.39 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.74 | e | | | (.62 | ) | | | (2.54 | ) | | | (6.83 | ) | | | 1.93 | |
Total from investment operations | | | 3.84 | | | | (.48 | ) | | | (2.72 | ) | | | (7.14 | ) | | | 1.54 | |
Less distributions from: |
Net investment income | | | (.14 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.14 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 24.12 | | | $ | 20.42 | | | $ | 20.90 | | | $ | 23.62 | | | $ | 30.76 | |
|
Total Returnb | | | 19.00 | % | | | (2.30 | %) | | | (11.52 | %) | | | (23.21 | %) | | | 5.27 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 207 | | | $ | 746 | | | $ | 262 | | | $ | 8,645 | | | $ | 2,795 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.51 | % | | | 0.65 | % | | | (0.76 | %) | | | (1.11 | %) | | | (1.23 | %) |
Total expensesc | | | 1.82 | % | | | 1.83 | % | | | 1.74 | % | | | 1.71 | % | | | 1.70 | % |
Net expensesd | | | 1.78 | % | | | 1.81 | % | | | 1.74 | % | | | 1.71 | % | | | 1.70 | % |
Portfolio turnover rate | | | 7 | % | | | 40 | % | | | — | | | | 58 | % | | | 584 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 18.21 | | | $ | 18.79 | | | $ | 21.41 | | | $ | 28.07 | | | $ | 26.86 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.06 | ) | | | (.05 | ) | | | (.25 | ) | | | (.45 | ) | | | (.58 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.34 | e | | | (.53 | ) | | | (2.37 | ) | | | (6.21 | ) | | | 1.79 | |
Total from investment operations | | | 3.28 | | | | (.58 | ) | | | (2.62 | ) | | | (6.66 | ) | | | 1.21 | |
Less distributions from: |
Net investment income | | | (.14 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.14 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 21.35 | | | $ | 18.21 | | | $ | 18.79 | | | $ | 21.41 | | | $ | 28.07 | |
|
Total Returnb | | | 18.22 | % | | | (3.09 | %) | | | (12.24 | %) | | | (23.73 | %) | | | 4.50 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 94 | | | $ | 460 | | | $ | 607 | | | $ | 1,028 | | | $ | 1,729 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.34 | %) | | | (0.26 | %) | | | (1.22 | %) | | | 1.83 | % | | | (2.08 | %) |
Total expensesc | | | 2.57 | % | | | 2.56 | % | | | 2.48 | % | | | 2.47 | % | | | 2.45 | % |
Net expensesd | | | 2.53 | % | | | 2.55 | % | | | 2.48 | % | | | 2.47 | % | | | 2.45 | % |
Portfolio turnover rate | | | 7 | % | | | 40 | % | | | — | | | | 58 | % | | | 584 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 111 |
INVERSE RUSSELL 2000® STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 20.49 | | | $ | 20.96 | | | $ | 23.69 | | | $ | 30.83 | | | $ | 29.30 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .02 | | | | .11 | | | | (.09 | ) | | | (.32 | ) | | | (.41 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.85 | e | | | (.58 | ) | | | (2.64 | ) | | | (6.82 | ) | | | 1.94 | |
Total from investment operations | | | 3.87 | | | | (.47 | ) | | | (2.73 | ) | | | (7.14 | ) | | | 1.53 | |
Less distributions from: |
Net investment income | | | (.14 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.14 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 24.22 | | | $ | 20.49 | | | $ | 20.96 | | | $ | 23.69 | | | $ | 30.83 | |
|
Total Return | | | 19.08 | % | | | (2.24 | %) | | | (11.52 | %) | | | (23.16 | %) | | | 5.22 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 22,414 | | | $ | 9,392 | | | $ | 3,543 | | | $ | 5,777 | | | $ | 36,713 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.07 | % | | | 0.53 | % | | | (0.39 | %) | | | (1.14 | %) | | | (1.28 | %) |
Total expensesc | | | 1.82 | % | | | 1.82 | % | | | 1.72 | % | | | 1.72 | % | | | 1.70 | % |
Net expensesd | | | 1.79 | % | | | 1.81 | % | | | 1.72 | % | | | 1.72 | % | | | 1.70 | % |
Portfolio turnover rate | | | 7 | % | | | 40 | % | | | — | | | | 58 | % | | | 584 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
DOW JONES INDUSTRIAL AVERAGE® FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the Dow Jones Industrials Average® (the “underlying index”).
For the one-year period ended March 31, 2020, Dow Jones Industrial Average® Fund maintained a daily correlation of over 99% to its benchmark of 100% of the daily price movement of the Dow Jones Industrial Average Index.
Dow Jones Industrial Average® Fund H-Class returned -15.40%, while the Dow Jones Industrial Average Index returned -13.38% over the same time period.
The only sector contributing to the return of the underlying index was Information Technology. The sectors detracting the most were Industrials, Financials, and Energy.
The holdings contributing the most to the return of the underlying index were Apple, Inc., Microsoft Corp., and Walmart, Inc. The holdings detracting the most were Boeing Co., 3M Co., and Chevron Corp.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
| | THE RYDEX FUNDS ANNUAL REPORT | 113 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | December 1, 2015 |
C-Class | December 1, 2015 |
H-Class | December 1, 2015 |
Cumulative Fund Performance*
Ten Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund II | 6.2% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 5.2% |
Apple, Inc. | 3.8% |
UnitedHealth Group, Inc. | 3.7% |
Home Depot, Inc. | 2.8% |
McDonald’s Corp. | 2.4% |
Visa, Inc. — Class A | 2.4% |
Microsoft Corp. | 2.3% |
Goldman Sachs Group, Inc. | 2.3% |
Boeing Co. | 2.2% |
Top Ten Total | 33.3% |
| | |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | Since
Inception
(12/01/15) |
A-Class Shares | (15.38%) | 5.49% |
A-Class Shares with sales charge‡ | (19.40%) | 4.31% |
C-Class Shares | (16.03%) | 4.70% |
C-Class Shares with CDSC§ | (16.83%) | 4.70% |
H-Class Shares | (15.40%) | 5.50% |
Dow Jones Industrial Average Index | (13.38%) | 7.37% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Dow Jones Industrial Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
114 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
DOW JONES INDUSTRIAL AVERAGE® FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 47.7% |
| | | | | | | | | |
Consumer, Non-cyclical - 9.5% |
UnitedHealth Group, Inc. | | | 4,225 | | | $ | 1,053,631 | |
Johnson & Johnson | | | 4,225 | | | | 554,024 | |
Procter & Gamble Co. | | | 4,225 | | | | 464,750 | |
Merck & Company, Inc. | | | 4,225 | | | | 325,072 | |
Coca-Cola Co. | | | 4,225 | | | | 186,956 | |
Pfizer, Inc. | | | 4,225 | | | | 137,904 | |
Total Consumer, Non-cyclical | | | | | | | 2,722,337 | |
| | | | | | | | | |
Consumer, Cyclical - 8.8% |
Home Depot, Inc. | | | 4,225 | | | | 788,850 | |
McDonald’s Corp. | | | 4,225 | | | | 698,604 | |
Walmart, Inc. | | | 4,225 | | | | 480,044 | |
NIKE, Inc. — Class B | | | 4,225 | | | | 349,576 | |
Walgreens Boots Alliance, Inc. | | | 4,225 | | | | 193,294 | |
Total Consumer, Cyclical | | | | | | | 2,510,368 | |
| | | | | | | | | |
Financial - 8.7% |
Visa, Inc. — Class A | | | 4,225 | | | | 680,732 | |
Goldman Sachs Group, Inc. | | | 4,225 | | | | 653,142 | |
Travelers Companies, Inc. | | | 4,225 | | | | 419,754 | |
JPMorgan Chase & Co. | | | 4,225 | | | | 380,377 | |
American Express Co. | | | 4,225 | | | | 361,702 | |
Total Financial | | | | | | | 2,495,707 | |
| | | | | | | | | |
Technology - 8.5% |
Apple, Inc. | | | 4,225 | | | | 1,074,375 | |
Microsoft Corp. | | | 4,225 | | | | 666,325 | |
International Business Machines Corp. | | | 4,225 | | | | 468,679 | |
Intel Corp. | | | 4,225 | | | | 228,657 | |
Total Technology | | | | | | | 2,438,036 | |
| | | | | | | | | |
Industrial - 7.3% |
Boeing Co. | | | 4,225 | | | | 630,117 | |
3M Co. | | | 4,225 | | | | 576,755 | |
Caterpillar, Inc. | | | 4,225 | | | | 490,269 | |
United Technologies Corp.* | | | 4,225 | | | | 398,544 | |
Total Industrial | | | | | | | 2,095,685 | |
| | | | | | | | | |
Communications - 2.8% |
Walt Disney Co. | | | 4,225 | | | | 408,135 | |
Verizon Communications, Inc. | | | 4,225 | | | | 227,009 | |
Cisco Systems, Inc. | | | 4,225 | | | | 166,085 | |
Total Communications | | | | | | | 801,229 | |
| | | | | | | | | |
Energy - 1.6% |
Chevron Corp. | | | 4,225 | | | | 306,144 | |
Exxon Mobil Corp. | | | 4,225 | | | | 160,423 | |
Total Energy | | | | | | | 466,567 | |
| | | | | | | | | |
Basic Materials - 0.5% |
Dow, Inc. | | | 4,225 | | | | 123,539 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $12,812,470) | | | | | | | 13,653,468 | |
| | | | | | | | | |
MUTUAL FUNDS† - 11.4% |
Guggenheim Strategy Fund II1 | | | 73,498 | | | | 1,767,616 | |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 152,829 | | | | 1,493,141 | |
Total Mutual Funds | | | | |
(Cost $3,339,992) | | | | | | | 3,260,757 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
U.S. TREASURY BILLS†† - 0.2% |
U.S. Treasury Bills |
0.50% due 04/30/202,3 | | $ | 61,000 | | | | 60,997 | |
Total U.S. Treasury Bills | | | | |
(Cost $60,975) | | | | | | | 60,997 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,4 - 22.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/205 | | | 4,626,627 | | | | 4,626,627 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/205 | | | 1,779,472 | | | | 1,779,472 | |
Total Repurchase Agreements | | | | |
(Cost $6,406,099) | | | | | | | 6,406,099 | |
| | | | | | | | | |
Total Investments - 81.7% | | | | |
(Cost $22,619,536) | | $ | 23,381,321 | |
Other Assets & Liabilities, net - 18.3% | | | 5,238,233 | |
Total Net Assets - 100.0% | | $ | 28,619,554 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
Dow Jones Industrial Average Index Mini Futures Contracts | | | 21 | | | | Jun 2020 | | | $ | 2,286,795 | | | $ | 177,057 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
DOW JONES INDUSTRIAL AVERAGE® FUND | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Depreciation | |
OTC Equity Index Swap Agreements†† |
BNP Paribas | Dow Jones Industrial Average Index | 1.49% (1 Month USD LIBOR + 0.50%) | At Maturity | | | 04/29/20 | | | | 131 | | | $ | 2,865,599 | | | $ | (83,026 | ) |
Barclays Bank plc | Dow Jones Industrial Average Index | 1.09% (1 Week USD LIBOR + 0.50%) | At Maturity | | | 04/30/20 | | | | 449 | | | | 9,843,601 | | | | (184,289 | ) |
| | | | | | | | | | | | | | $ | 12,709,200 | | | $ | (267,315 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 13,653,468 | | | $ | — | | | $ | — | | | $ | 13,653,468 | |
Mutual Funds | | | 3,260,757 | | | | — | | | | — | | | | 3,260,757 | |
U.S. Treasury Bills | | | — | | | | 60,997 | | | | — | | | | 60,997 | |
Repurchase Agreements | | | — | | | | 6,406,099 | | | | — | | | | 6,406,099 | |
Equity Futures Contracts** | | | 177,057 | | | | — | | | | — | | | | 177,057 | |
Total Assets | | $ | 17,091,282 | | | $ | 6,467,096 | | | $ | — | | | $ | 23,558,378 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 267,315 | | | $ | — | | | $ | 267,315 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
116 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
DOW JONES INDUSTRIAL AVERAGE® FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 3,422,469 | | | $ | — | | | $ | (1,600,000 | ) | | $ | (5,028 | ) | | $ | (49,825 | ) | | $ | 1,767,616 | | | | 73,498 | | | $ | 74,422 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 3,423,509 | | | | — | | | | (1,900,000 | ) | | | 2,103 | | | | (32,471 | ) | | | 1,493,141 | | | | 152,829 | | | | 68,431 | |
| | | $ | 6,845,978 | | | $ | — | | | $ | (3,500,000 | ) | | $ | (2,925 | ) | | $ | (82,296 | ) | | $ | 3,260,757 | | | | | | | $ | 142,853 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 117 |
DOW JONES INDUSTRIAL AVERAGE® FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $12,873,445) | | $ | 13,714,465 | |
Investments in affiliated issuers, at value (cost $3,339,992) | | | 3,260,757 | |
Repurchase agreements, at value (cost $6,406,099) | | | 6,406,099 | |
Cash | | | 4,911,369 | |
Segregated cash with broker | | | 1,351,395 | |
Receivables: |
Fund shares sold | | | 91,014 | |
Dividends | | | 13,920 | |
Interest | | | 2 | |
Total assets | | | 29,749,021 | |
| | | | | |
Liabilities: |
Segregated cash due to broker | | | 337,086 | |
Unrealized depreciation on OTC swap agreements | | | 267,315 | |
Payable for: |
Fund shares redeemed | | | 425,908 | |
Variation margin on futures contracts | | | 40,740 | |
Management fees | | | 12,171 | |
Swap settlement | | | 5,545 | |
Distribution and service fees | | | 5,270 | |
Transfer agent and administrative fees | | | 5,113 | |
Portfolio accounting fees | | | 1,668 | |
Trustees’ fees* | | | 428 | |
Miscellaneous | | | 28,223 | |
Total liabilities | | | 1,129,467 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 28,619,554 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 30,000,586 | |
Total distributable earnings (loss) | | | (1,381,032 | ) |
Net assets | | $ | 28,619,554 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,651,761 | |
Capital shares outstanding | | | 46,254 | |
Net asset value per share | | $ | 57.33 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 60.19 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,636,542 | |
Capital shares outstanding | | | 29,554 | |
Net asset value per share | | $ | 55.37 | |
| | | | | |
H-Class: |
Net assets | | $ | 24,331,251 | |
Capital shares outstanding | | | 424,173 | |
Net asset value per share | | $ | 57.36 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of unaffiliated issuers | | $ | 540,106 | |
Dividends from securities of affiliated issuers | | | 142,853 | |
Interest | | | 48,511 | |
Total investment income | | | 731,470 | |
| | | | | |
Expenses: |
Management fees | | | 235,233 | |
Distribution and service fees: |
A-Class | | | 14,166 | |
C-Class | | | 21,558 | |
H-Class | | | 58,856 | |
Transfer agent and administrative fees | | | 79,354 | |
Registration fees | | | 35,126 | |
Portfolio accounting fees | | | 31,364 | |
Professional fees | | | 15,667 | |
Trustees’ fees* | | | 9,175 | |
Custodian fees | | | 4,600 | |
Miscellaneous | | | 31,993 | |
Total expenses | | | 537,092 | |
Less: |
Expenses waived by Adviser | | | (6,814 | ) |
Net expenses | | | 530,278 | |
Net investment income | | | 201,192 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 5,323,674 | |
Investments in affiliated issuers | | | (2,925 | ) |
Swap agreements | | | 25,921 | |
Futures contracts | | | (279,514 | ) |
Net realized gain | | | 5,067,156 | |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (6,841,606 | ) |
Investments in affiliated issuers | | | (82,296 | ) |
Swap agreements | | | (400,302 | ) |
Futures contracts | | | 177,355 | |
Net change in unrealized appreciation (depreciation) | | | (7,146,849 | ) |
Net realized and unrealized loss | | | (2,079,693 | ) |
Net decrease in net assets resulting from operations | | $ | (1,878,501 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
118 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW JONES INDUSTRIAL AVERAGE® FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 201,192 | | | $ | 422,699 | |
Net realized gain on investments | | | 5,067,156 | | | | 8,709,934 | |
Net change in unrealized appreciation (depreciation) on investments | | | (7,146,849 | ) | | | (4,608,320 | ) |
Net increase (decrease) in net assets resulting from operations | | | (1,878,501 | ) | | | 4,524,313 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (159,709 | ) | | | (104,984 | ) |
C-Class | | | (98,345 | ) | | | (22,489 | ) |
H-Class | | | (892,516 | ) | | | (463,766 | ) |
Total distributions to shareholders | | | (1,150,570 | ) | | | (591,239 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 16,273,565 | | | | 78,585,897 | |
C-Class | | | 2,489,125 | | | | 1,582,226 | |
H-Class | | | 141,553,466 | | | | 462,514,750 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 127,980 | | | | 76,561 | |
C-Class | | | 93,396 | | | | 21,083 | |
H-Class | | | 889,793 | | | | 463,042 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (32,450,685 | ) | | | (81,898,564 | ) |
C-Class | | | (2,248,063 | ) | | | (3,347,159 | ) |
H-Class | | | (156,450,347 | ) | | | (493,573,657 | ) |
Net decrease from capital share transactions | | | (29,721,770 | ) | | | (35,575,821 | ) |
Net decrease in net assets | | | (32,750,841 | ) | | | (31,642,747 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 61,370,395 | | | | 93,013,142 | |
End of year | | $ | 28,619,554 | | | $ | 61,370,395 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 272,947 | | | | 1,150,595 | |
C-Class | | | 35,697 | | | | 23,845 | |
H-Class | | | 2,026,607 | | | | 6,744,613 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 1,746 | | | | 1,155 | |
C-Class | | | 1,316 | | | | 326 | |
H-Class | | | 12,134 | | | | 6,984 | |
Shares redeemed | | | | | | | | |
A-Class | | | (498,107 | ) | | | (1,199,548 | ) |
C-Class | | | (32,647 | ) | | | (49,811 | ) |
H-Class | | | (2,189,993 | ) | | | (7,217,481 | ) |
Net decrease in shares | | | (370,300 | ) | | | (539,322 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 119 |
DOW JONES INDUSTRIAL AVERAGE® FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Period Ended
March 31,
2016a | |
Per Share Data |
Net asset value, beginning of period | | $ | 70.54 | | | $ | 66.00 | | | $ | 58.25 | | | $ | 49.60 | | | $ | 50.00 | |
Income (loss) from investment operations: |
Net investment income (loss)b | | | .47 | | | | .55 | | | | .34 | | | | .23 | | | | (.03 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.67 | ) | | | 4.78 | | | | 9.91 | | | | 8.73 | | | | (.37 | ) |
Total from investment operations | | | (10.20 | ) | | | 5.33 | | | | 10.25 | | | | 8.96 | | | | (.40 | ) |
Less distributions from: |
Net investment income | | | (.31 | ) | | | (.64 | ) | | | (.35 | ) | | | (.02 | ) | | | — | |
Net realized gains | | | (2.70 | ) | | | (.15 | ) | | | (2.15 | ) | | | (.29 | ) | | | — | |
Total distributions | | | (3.01 | ) | | | (.79 | ) | | | (2.50 | ) | | | (.31 | ) | | | — | |
Net asset value, end of period | | $ | 57.33 | | | $ | 70.54 | | | $ | 66.00 | | | $ | 58.25 | | | $ | 49.60 | |
|
Total Returnc | | | (15.38 | %) | | | 8.15 | % | | | 17.55 | % | | | 18.10 | % | | | (0.80 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,652 | | | $ | 19,022 | | | $ | 20,953 | | | $ | 19,523 | | | $ | 44,351 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.65 | % | | | 0.80 | % | | | 0.54 | % | | | 0.44 | % | | | (0.21 | %) |
Total expensesd | | | 1.66 | % | | | 1.61 | % | | | 1.56 | % | | | 1.56 | % | | | 1.55 | % |
Net expensese | | | 1.64 | % | | | 1.61 | % | | | 1.56 | % | | | 1.56 | % | | | 1.55 | % |
Portfolio turnover rate | | | 186 | % | | | 465 | % | | | 168 | % | | | 668 | % | | | 98 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Period Ended
March 31,
2016a | |
Per Share Data |
Net asset value, beginning of period | | $ | 68.74 | | | $ | 64.81 | | | $ | 57.66 | | | $ | 49.47 | | | $ | 50.00 | |
Income (loss) from investment operations: |
Net investment income (loss)b | | | (.02 | ) | | | .03 | | | | (.09 | ) | | | (.11 | ) | | | (.07 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.34 | ) | | | 4.69 | | | | 9.74 | | | | 8.61 | | | | (.46 | ) |
Total from investment operations | | | (10.36 | ) | | | 4.72 | | | | 9.65 | | | | 8.50 | | | | (.53 | ) |
Less distributions from: |
Net investment income | | | (.31 | ) | | | (.64 | ) | | | (.35 | ) | | | (.02 | ) | | | — | |
Net realized gains | | | (2.70 | ) | | | (.15 | ) | | | (2.15 | ) | | | (.29 | ) | | | — | |
Total distributions | | | (3.01 | ) | | | (.79 | ) | | | (2.50 | ) | | | (.31 | ) | | | — | |
Net asset value, end of period | | $ | 55.37 | | | $ | 68.74 | | | $ | 64.81 | | | $ | 57.66 | | | $ | 49.47 | |
|
Total Returnc | | | (16.03 | %) | | | 7.37 | % | | | 16.66 | % | | | 17.21 | % | | | (1.06 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,637 | | | $ | 1,731 | | | $ | 3,294 | | | $ | 2,144 | | | $ | 732 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.03 | %) | | | 0.04 | % | | | (0.14 | %) | | | (0.21 | %) | | | (0.43 | %) |
Total expensesd | | | 2.42 | % | | | 2.36 | % | | | 2.30 | % | | | 2.32 | % | | | 2.30 | % |
Net expensese | | | 2.40 | % | | | 2.36 | % | | | 2.36 | % | | | 2.32 | % | | | 2.30 | % |
Portfolio turnover rate | | | 186 | % | | | 465 | % | | | 168 | % | | | 668 | % | | | 98 | % |
120 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW JONES INDUSTRIAL AVERAGE® FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Period Ended
March 31,
2016a | |
Per Share Data |
Net asset value, beginning of period | | $ | 70.59 | | | $ | 66.04 | | | $ | 58.28 | | | $ | 49.59 | | | $ | 50.00 | |
Income (loss) from investment operations: |
Net investment income (loss)b | | | .51 | | | | .55 | | | | .39 | | | | .28 | | | | (.03 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.73 | ) | | | 4.79 | | | | 9.87 | | | | 8.72 | | | | (.38 | ) |
Total from investment operations | | | (10.22 | ) | | | 5.34 | | | | 10.26 | | | | 9.00 | | | | (.41 | ) |
Less distributions from: |
Net investment income | | | (.31 | ) | | | (.64 | ) | | | (.35 | ) | | | (.02 | ) | | | — | |
Net realized gains | | | (2.70 | ) | | | (.15 | ) | | | (2.15 | ) | | | (.29 | ) | | | — | |
Total distributions | | | (3.01 | ) | | | (.79 | ) | | | (2.50 | ) | | | (.31 | ) | | | — | |
Net asset value, end of period | | $ | 57.36 | | | $ | 70.59 | | | $ | 66.04 | | | $ | 58.28 | | | $ | 49.59 | |
|
Total Return | | | (15.40 | %) | | | 8.16 | % | | | 17.54 | % | | | 18.20 | % | | | (0.82 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 24,331 | | | $ | 40,617 | | | $ | 68,766 | | | $ | 42,495 | | | $ | 18,923 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.70 | % | | | 0.80 | % | | | 0.61 | % | | | 0.52 | % | | | (0.17 | %) |
Total expensesd | | | 1.66 | % | | | 1.62 | % | | | 1.55 | % | | | 1.57 | % | | | 1.55 | % |
Net expensese | | | 1.64 | % | | | 1.62 | % | | | 1.55 | % | | | 1.57 | % | | | 1.55 | % |
Portfolio turnover rate | | | 186 | % | | | 465 | % | | | 168 | % | | | 668 | % | | | 98 | % |
a | Since commencement of operations: December 1, 2015. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
b | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
c | Total return does not reflect the impact of any applicable sales charges. |
d | Does not include expenses of the underlying funds in which the Fund invests. |
e | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correspond, before fees and expenses, to a benchmark for U.S. Government securities on a daily basis. The Fund’s current benchmark is 120% of the daily price movement of the Long Treasury Bond. The Long Treasury Bond is the U.S. Treasury bond with the longest maturity, which is currently 30 years. The price movement of the Long Treasury Bond is based on the daily price change of the most recently issued Long Treasury Bond. The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, the Government Long Bond 1.2x Strategy Fund Investor Class returned 45.84%.
The Price Movement of Long Treasury Bond was 36.56% for the period.
The return of a comparison index, the Bloomberg Barclays U.S. Long Treasury Index was 32.64%.
As prices of long-term Treasury bonds rose over the period, their yield fell 54%, from 2.81% to 1.32%. Early in the period, robust institutional buying was driven by improving economic fundamentals, yield-starved foreign demand, and the secular decline in inflation. The buying led to an inversion of the 2-year/10-year yield curve in August, which was accompanied by the rate on the 30-year U.S. Treasury Bond sinking to an all-time low, at 1.90%.
Beginning in the mid-first quarter of 2020, fearful of global economic fallout from the coronavirus outbreak and oil price instability stemming from continued output by Russia and Saudi Arabia at unreduced levels, investors rushed into safe havens and sent prices of U.S. Treasuries skyrocketing. In early March, for the first time ever, the entire yield curve briefly slipped below 1%, and the yield on the 30-year Treasury yield fell below 1%.
Derivatives in the Fund are used to provide additional exposure to composition of the benchmark in the most efficient manner possible and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amounts and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles had a negligible impact on Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
122 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(continued) | March 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Dates: |
Investor Class | January 3, 1994 |
A-Class | March 31, 2004 |
C-Class | May 2, 2001 |
H-Class | September 18, 2014 |
The Fund invests principally in U.S. Government securities and in derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) |
U.S. Treasury Bond | 71.3% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 8.7% |
Guggenheim Strategy Fund II | 8.7% |
Total | 88.7% |
| | |
“Largest Holdings” excludes any temporary cash or derivative investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 123 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | 45.84% | 7.90% | 11.22% |
A-Class Shares | 45.48% | 7.66% | 11.03% |
A-Class Shares with sales charge‡ | 38.59% | 6.62% | 10.49% |
C-Class Shares | 44.41% | 6.86% | 10.16% |
C-Class Shares with CDSC§ | 43.41% | 6.86% | 10.16% |
Bloomberg Barclays U.S. Long Treasury Index | 32.64% | 7.33% | 8.96% |
Price Movement of Long Treasury Bond** | 36.56% | 4.88% | 6.26% |
| 1 Year | 5 Year | Since
Inception
(09/18/14) |
H-Class Shares | 45.55% | 7.69% | 10.88% |
Bloomberg Barclays U.S. Long Treasury Index | 32.64% | 7.33% | 9.46% |
Price Movement of Long Treasury Bond** | 36.56% | 4.88% | 7.49% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Long Treasury Index and the Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
** | Does not reflect any interest. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
124 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 17.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 1,075,874 | | | $ | 10,511,293 | |
Guggenheim Strategy Fund II1 | | | 433,141 | | | | 10,417,042 | |
Total Mutual Funds | | | | |
(Cost $21,481,550) | | | | | | | 20,928,335 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
U.S. GOVERNMENT SECURITIES†† - 71.3% |
U.S. Treasury Bonds |
2.00% due 02/15/50 | | $ | 73,700,000 | | | | 85,584,125 | |
Total U.S. Government Securities | | | | |
(Cost $74,100,497) | | | | | | | 85,584,125 | |
| | | | | | | | | |
U.S. TREASURY BILLS†† - 2.0% |
U.S. Treasury Bills |
0.50% due 04/30/202,3 | | | 2,372,000 | | | | 2,371,894 | |
Total U.S. Treasury Bills | | | | |
(Cost $2,371,030) | | | | | | | 2,371,894 | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS††,4- 6.2% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | | 5,386,663 | | | | 5,386,663 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 2,071,794 | | | | 2,071,794 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $7,458,457) | | | | | | | 7,458,457 | |
| | | | | | | | | |
| Total Investments - 96.9% | | | | | | | | |
| (Cost $105,411,534) | | | | | | $ | 116,342,811 | |
| Other Assets & Liabilities, net - 3.1% | | | | | | | 3,670,103 | |
| Total Net Assets - 100.0% | | | | | | $ | 120,012,914 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Interest Rate Futures Contracts Purchased† |
U.S. Treasury Ultra Long Bond Futures Contracts | | | 315 | | | | Jun 2020 | | | $ | 70,028,438 | | | $ | 7,474,465 | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 20,928,335 | | | $ | — | | | $ | — | | | $ | 20,928,335 | |
U.S. Government Securities | | | — | | | | 85,584,125 | | | | — | | | | 85,584,125 | |
U.S. Treasury Bills | | | — | | | | 2,371,894 | | | | — | | | | 2,371,894 | |
Repurchase Agreements | | | — | | | | 7,458,457 | | | | — | | | | 7,458,457 | |
Interest Rate Futures Contracts** | | | 7,474,465 | | | | — | | | | — | | | | 7,474,465 | |
Total Assets | | $ | 28,402,800 | | | $ | 95,414,476 | | | $ | — | | | $ | 123,817,276 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 10,298,989 | | | $ | 7,550,000 | | | $ | (7,085,000 | ) | | $ | (60,717 | ) | | $ | (286,230 | ) | | $ | 10,417,042 | | | | 433,141 | | | $ | 290,561 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 9,520,254 | | | | 6,750,000 | | | | (5,535,000 | ) | | | (31,447 | ) | | | (192,514 | ) | | | 10,511,293 | | | | 1,075,874 | | | | 254,656 | |
| | | $ | 19,819,243 | | | $ | 14,300,000 | | | $ | (12,620,000 | ) | | $ | (92,164 | ) | | $ | (478,744 | ) | | $ | 20,928,335 | | | | | | | $ | 545,217 | |
126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $76,471,527) | | $ | 87,956,019 | |
Investments in affiliated issuers, at value (cost $21,481,550) | | | 20,928,335 | |
Repurchase agreements, at value (cost $7,458,457) | | | 7,458,457 | |
Cash | | | 5,979,537 | |
Segregated cash with broker | | | 2,497,955 | |
Receivables: |
Securities sold | | | 8,477,125 | |
Interest | | | 223,311 | |
Fund shares sold | | | 44,140 | |
Dividends | | | 38,487 | |
Investment Adviser | | | 889 | |
Total assets | | | 133,604,255 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 12,191,624 | |
Variation margin on futures contracts | | | 976,295 | |
Management fees | | | 68,328 | |
Transfer agent and administrative fees | | | 34,397 | |
Distribution and service fees | | | 19,585 | |
Portfolio accounting fees | | | 14,091 | |
Distributions to shareholders | | | 4,720 | |
Trustees’ fees* | | | 4,059 | |
Miscellaneous | | | 278,242 | |
Total liabilities | | | 13,591,341 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 120,012,914 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 96,544,853 | |
Total distributable earnings (loss) | | | 23,468,061 | |
Net assets | | $ | 120,012,914 | |
| | | | | |
Investor Class: |
Net assets | | $ | 37,918,863 | |
Capital shares outstanding | | | 511,640 | |
Net asset value per share | | $ | 74.11 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,775,353 | |
Capital shares outstanding | | | 37,152 | |
Net asset value per share | | $ | 74.70 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 78.43 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,248,607 | |
Capital shares outstanding | | | 16,840 | |
Net asset value per share | | $ | 74.15 | |
| | | | | |
H-Class: |
Net assets | | $ | 78,070,091 | |
Capital shares outstanding | | | 1,044,353 | |
Net asset value per share | | $ | 74.75 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 545,217 | |
Interest | | | 2,766,899 | |
Total investment income | | | 3,312,116 | |
| | | | | |
Expenses: |
Management fees | | | 704,883 | |
Distribution and service fees: |
A-Class | | | 35,771 | |
C-Class | | | 9,323 | |
H-Class | | | 152,065 | |
Transfer agent and administrative fees | | | 288,170 | |
Portfolio accounting fees | | | 140,941 | |
Registration fees | | | 134,824 | |
Professional fees | | | 84,107 | |
Trustees’ fees* | | | 37,457 | |
Custodian fees | | | 20,251 | |
Line of credit fees | | | 55 | |
Miscellaneous | | | 100,114 | |
Total expenses | | | 1,707,961 | |
Less: |
Expenses waived by Adviser | | | (26,231 | ) |
Net expenses | | | 1,681,730 | |
Net investment income | | | 1,630,386 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 28,514,450 | |
Investments in affiliated issuers | | | (92,164 | ) |
Futures contracts | | | 13,924,630 | |
Net realized gain | | | 42,346,916 | |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 6,707,335 | |
Investments in affiliated issuers | | | (478,744 | ) |
Futures contracts | | | 5,019,267 | |
Net change in unrealized appreciation (depreciation) | | | 11,247,858 | |
Net realized and unrealized gain | | | 53,594,774 | |
Net increase in net assets resulting from operations | | $ | 55,225,160 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 127 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 1,630,386 | | | $ | 2,272,131 | |
Net realized gain on investments | | | 42,346,916 | | | | 9,037,811 | |
Net change in unrealized appreciation (depreciation) on investments | | | 11,247,858 | | | | 2,294,507 | |
Net increase in net assets resulting from operations | | | 55,225,160 | | | | 13,604,449 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (2,108,783 | ) | | | (914,867 | ) |
A-Class | | | (435,810 | ) | | | (163,323 | ) |
C-Class | | | (21,938 | ) | | | (9,678 | ) |
H-Class | | | (1,738,251 | ) | | | (1,184,263 | ) |
Total distributions to shareholders | | | (4,304,782 | ) | | | (2,272,131 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 962,124,357 | | | | 731,937,613 | |
A-Class | | | 4,581,047 | | | | 24,971,881 | |
C-Class | | | 7,550,985 | | | | 17,049,193 | |
H-Class | | | 790,950,225 | | | | 782,907,060 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 1,970,914 | | | | 826,982 | |
A-Class | | | 423,677 | | | | 159,458 | |
C-Class | | | 20,877 | | | | 9,081 | |
H-Class | | | 1,736,665 | | | | 1,180,471 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (1,014,887,608 | ) | | | (709,185,722 | ) |
A-Class | | | (32,933,999 | ) | | | (8,255,917 | ) |
C-Class | | | (7,268,837 | ) | | | (17,260,604 | ) |
H-Class | | | (779,922,941 | ) | | | (821,319,993 | ) |
Net increase (decrease) from capital share transactions | | | (65,654,638 | ) | | | 3,019,503 | |
Net increase (decrease) in net assets | | | (14,734,260 | ) | | | 14,351,821 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 134,747,174 | | | | 120,395,353 | |
End of year | | $ | 120,012,914 | | | $ | 134,747,174 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 16,000,438 | | | | 14,900,624 | |
A-Class | | | 74,378 | | | | 500,367 | |
C-Class | | | 126,059 | | | | 340,165 | |
H-Class | | | 13,427,183 | | | | 15,608,139 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 33,535 | | | | 16,612 | |
A-Class | | | 7,261 | | | | 3,118 | |
C-Class | | | 359 | | | | 182 | |
H-Class | | | 29,371 | | | | 23,521 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (16,783,183 | ) | | | (14,388,567 | ) |
A-Class | | | (503,938 | ) | | | (163,333 | ) |
C-Class | | | (120,980 | ) | | | (343,065 | ) |
H-Class | | | (13,202,385 | ) | | | (16,313,575 | ) |
Net increase (decrease) in shares | | | (911,902 | ) | | | 184,188 | |
128 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 53.22 | | | $ | 51.21 | | | $ | 50.49 | | | $ | 58.12 | | | $ | 59.12 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .77 | | | | .96 | | | | .80 | | | | .70 | | | | .76 | |
Net gain (loss) on investments (realized and unrealized) | | | 22.86 | | | | 2.00 | | | | .72 | | | | (5.50 | ) | | | (.67 | ) |
Total from investment operations | | | 23.63 | | | | 2.96 | | | | 1.52 | | | | (4.80 | ) | | | .09 | |
Less distributions from: |
Net investment income | | | (.77 | ) | | | (.95 | ) | | | (.80 | ) | | | (.72 | ) | | | (1.09 | ) |
Net realized gains | | | (1.97 | ) | | | — | | | | — | | | | (2.11 | ) | | | — | |
Total distributions | | | (2.74 | ) | | | (.95 | ) | | | (.80 | ) | | | (2.83 | ) | | | (1.09 | ) |
Net asset value, end of period | | $ | 74.11 | | | $ | 53.22 | | | $ | 51.21 | | | $ | 50.49 | | | $ | 58.12 | |
|
Total Return | | | 45.84 | % | | | 5.93 | % | | | 3.01 | % | | | (8.39 | %) | | | 0.33 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 37,919 | | | $ | 67,103 | | | $ | 37,496 | | | $ | 16,496 | | | $ | 56,419 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.28 | % | | | 1.94 | % | | | 1.52 | % | | | 1.21 | % | | | 1.39 | % |
Total expensesb | | | 1.07 | % | | | 1.07 | % | | | 0.98 | % | | | 0.98 | % | | | 0.94 | % |
Net expensesc | | | 1.05 | % | | | 1.06 | % | | | 0.98 | % | | | 0.98 | % | | | 0.94 | % |
Portfolio turnover rate | | | 1,130 | % | | | 1,182 | % | | | 1,468 | % | | | 2,490 | % | | | 2,699 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 53.63 | | | $ | 51.62 | | | $ | 50.87 | | | $ | 58.50 | | | $ | 59.47 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .72 | | | | .83 | | | | .69 | | | | .63 | | | | .64 | |
Net gain (loss) on investments (realized and unrealized) | | | 22.95 | | | | 2.01 | | | | .74 | | | | (5.57 | ) | | | (.65 | ) |
Total from investment operations | | | 23.67 | | | | 2.84 | | | | 1.43 | | | | (4.94 | ) | | | (.01 | ) |
Less distributions from: |
Net investment income | | | (.63 | ) | | | (.83 | ) | | | (.68 | ) | | | (.58 | ) | | | (.96 | ) |
Net realized gains | | | (1.97 | ) | | | — | | | | — | | | | (2.11 | ) | | | — | |
Total distributions | | | (2.60 | ) | | | (.83 | ) | | | (.68 | ) | | | (2.69 | ) | | | (.96 | ) |
Net asset value, end of period | | $ | 74.70 | | | $ | 53.63 | | | $ | 51.62 | | | $ | 50.87 | | | $ | 58.50 | |
|
Total Returnd | | | 45.48 | % | | | 5.63 | % | | | 2.78 | % | | | (8.54 | %) | | | 0.12 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,775 | | | $ | 24,639 | | | $ | 6,158 | | | $ | 15,827 | | | $ | 9,438 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.24 | % | | | 1.65 | % | | | 1.31 | % | | | 1.19 | % | | | 1.16 | % |
Total expensesb | | | 1.32 | % | | | 1.33 | % | | | 1.23 | % | | | 1.24 | % | | | 1.20 | % |
Net expensesc | | | 1.30 | % | | | 1.32 | % | | | 1.23 | % | | | 1.24 | % | | | 1.20 | % |
Portfolio turnover rate | | | 1,130 | % | | | 1,182 | % | | | 1,468 | % | | | 2,490 | % | | | 2,699 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 129 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 53.27 | | | $ | 51.24 | | | $ | 50.52 | | | $ | 58.13 | | | $ | 59.09 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .13 | | | | .45 | | | | .27 | | | | .13 | | | | .22 | |
Net gain (loss) on investments (realized and unrealized) | | | 22.92 | | | | 2.04 | | | | .73 | | | | (5.47 | ) | | | (.64 | ) |
Total from investment operations | | | 23.05 | | | | 2.49 | | | | 1.00 | | | | (5.34 | ) | | | (.42 | ) |
Less distributions from: |
Net investment income | | | (.20 | ) | | | (.46 | ) | | | (.28 | ) | | | (.16 | ) | | | (.54 | ) |
Net realized gains | | | (1.97 | ) | | | — | | | | — | | | | (2.11 | ) | | | — | |
Total distributions | | | (2.17 | ) | | | (.46 | ) | | | (.28 | ) | | | (2.27 | ) | | | (.54 | ) |
Net asset value, end of period | | $ | 74.15 | | | $ | 53.27 | | | $ | 51.24 | | | $ | 50.52 | | | $ | 58.13 | |
|
Total Returnd | | | 44.41 | % | | | 4.92 | % | | | 1.97 | % | | | (9.24 | %) | | | (0.62 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,249 | | | $ | 607 | | | $ | 724 | | | $ | 1,770 | | | $ | 3,276 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.21 | % | | | 0.91 | % | | | 0.52 | % | | | 0.22 | % | | | 0.41 | % |
Total expensesb | | | 2.08 | % | | | 2.07 | % | | | 1.98 | % | | | 1.97 | % | | | 1.95 | % |
Net expensesc | | | 2.06 | % | | | 2.06 | % | | | 1.98 | % | | | 1.97 | % | | | 1.95 | % |
Portfolio turnover rate | | | 1,130 | % | | | 1,182 | % | | | 1,468 | % | | | 2,490 | % | | | 2,699 | % |
130 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 53.65 | | | $ | 51.64 | | | $ | 50.91 | | | $ | 58.55 | | | $ | 59.44 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .61 | | | | .84 | | | | .69 | | | | .58 | | | | .61 | |
Net gain (loss) on investments (realized and unrealized) | | | 23.09 | | | | 2.01 | | | | .72 | | | | (5.53 | ) | | | (.54 | ) |
Total from investment operations | | | 23.70 | | | | 2.85 | | | | 1.41 | | | | (4.95 | ) | | | .07 | |
Less distributions from: |
Net investment income | | | (.63 | ) | | | (.84 | ) | | | (.68 | ) | | | (.58 | ) | | | (.96 | ) |
Net realized gains | | | (1.97 | ) | | | — | | | | — | | | | (2.11 | ) | | | — | |
Total distributions | | | (2.60 | ) | | | (.84 | ) | | | (.68 | ) | | | (2.69 | ) | | | (.96 | ) |
Net asset value, end of period | | $ | 74.75 | | | $ | 53.65 | | | $ | 51.64 | | | $ | 50.91 | | | $ | 58.55 | |
|
Total Return | | | 45.55 | % | | | 5.63 | % | | | 2.74 | % | | | (8.55 | %) | | | 0.26 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 78,070 | | | $ | 42,397 | | | $ | 76,018 | | | $ | 12,077 | | | $ | 49,639 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.02 | % | | | 1.67 | % | | | 1.31 | % | | | 1.00 | % | | | 1.11 | % |
Total expensesb | | | 1.32 | % | | | 1.32 | % | | | 1.23 | % | | | 1.22 | % | | | 1.20 | % |
Net expensesc | | | 1.30 | % | | | 1.31 | % | | | 1.23 | % | | | 1.22 | % | | | 1.20 | % |
Portfolio turnover rate | | | 1,130 | % | | | 1,182 | % | | | 1,468 | % | | | 2,490 | % | | | 2,699 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Does not include expenses of the underlying funds in which the Fund invests. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Total return does not reflect the impact of any applicable sales charges. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 131 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND
OBJECTIVE: Seeks to provide total returns that inversely correlate, before fees and expenses, to the price movements of a benchmark for U.S. Treasury debt instruments or futures contract on a specified debt instrument on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the daily price movement of the Long Treasury Bond. The Long Treasury Bond is the U.S. Treasury bond with the longest maturity, which is currently 30 years. The price movement of the Long Treasury Bond is based on the daily price change of the most recently issued Long Treasury Bond. The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, the Inverse Government Long Bond Strategy Fund Investor Class returned -30.73%.
The Price Movement of Long Treasury Bond was 36.56% for the period.
The return of a comparison index, the Bloomberg Barclays U.S. Long Treasury Index was 32.64%.
As prices of long-term Treasury bonds rose over the period, their yields fell 54%, from 2.81% to 1.32%. Early in the period, robust institutional buying was driven by improving economic fundamentals, yield-starved foreign demand, and the secular decline in inflation. The buying led to an inversion of the 2-year/10-year yield curve in August, which was accompanied by the rate on the 30-year U.S. Treasury Bond sinking to an all-time low, at 1.90%.
Beginning in the mid-first quarter of 2020, fearful of global economic fallout from the coronavirus outbreak and oil price instability stemming from continued output by Russia and Saudi Arabia at unreduced levels. investors rushed into safe havens and sent prices of U.S. Treasuries skyrocketing. In early March, for the first time ever, the entire yield curve briefly slipped below 1%, and the yield on the 30-year Treasury yield fell below 1%.
Derivatives in the Fund are used to provide inverse exposure to composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amounts and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles had a negligible impact on Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
132 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(continued) | March 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Dates: |
Investor Class | March 3, 1995 |
A-Class | March 31, 2004 |
C-Class | March 28, 2001 |
H-Class | September 18, 2014 |
The Fund invests principally in short sales and derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund II | 11.2% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 9.9% |
Total | 21.1% |
| | |
“Largest Holdings” excludes any temporary cash or derivative investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 133 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | (30.73%) | (8.52%) | (10.97%) |
A-Class Shares | (30.90%) | (8.76%) | (11.19%) |
A-Class Shares with sales charge‡ | (34.17%) | (9.64%) | (11.62%) |
C-Class Shares | (31.41%) | (9.43%) | (11.85%) |
C-Class Shares with CDSC§ | (32.10%) | (9.43%) | (11.85%) |
Bloomberg Barclays U.S. Long Treasury Index | 32.64% | 7.33% | 8.96% |
Price Movement of Long Treasury Bond** | 36.56% | 4.88% | 6.26% |
| 1 Year | 5 Year | Since
Inception
(09/18/14) |
H-Class Shares | (30.93%) | (8.72%) | (11.00%) |
Bloomberg Barclays U.S. Long Treasury Index | 32.64% | 7.33% | 9.46% |
Price Movement of Long Treasury Bond** | 36.56% | 4.88% | 7.49% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Barclays Long Treasury Bond Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The Bloomberg Barclays U.S. Long Treasury Index and the Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
** | Does not reflect any interest. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
134 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 21.1% |
Guggenheim Strategy Fund II1 | | | 158,543 | | | $ | 3,812,960 | |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 347,920 | | | | 3,399,177 | |
Total Mutual Funds | | | | |
(Cost $7,370,928) | | | | | | | 7,212,137 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 57.4% |
Federal Farm Credit Bank |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | | $ | 6,800,000 | | | | 6,814,990 | |
0.40% (U.S. Prime Rate - 2.85%, Rate Floor: 0.00%) due 08/30/222 | | | 3,000,000 | | | | 3,010,257 | |
0.44% (U.S. Prime Rate - 2.81%, Rate Floor: 0.00%) due 05/20/222 | | | 2,220,000 | | | | 2,224,822 | |
0.34% (U.S. Prime Rate - 2.91%, Rate Floor: 0.00%) due 01/25/212 | | | 1,000,000 | | | | 1,000,890 | |
Federal Home Loan Bank |
0.13% (U.S. Secured Overnight Financing Rate + 0.10%, Rate Floor: 0.00%) due 07/29/202 | | | 1,500,000 | | | | 1,499,578 | |
0.06% (U.S. Secured Overnight Financing Rate + 0.03%, Rate Floor: 0.00%) due 07/17/202 | | | 1,200,000 | | | | 1,199,946 | |
0.75% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 12/18/202 | | | 865,000 | | | | 865,183 | |
Freddie Mac |
0.01% (U.S. Secured Overnight Financing Rate, Rate Floor: 0.00%) due 04/13/202 | | | 3,000,000 | | | | 2,999,929 | |
Total Federal Agency Notes | | | | |
(Cost $19,583,964) | | | | | | | 19,615,595 | |
| | | | | | | | | |
U.S. TREASURY BILLS†† - 1.0% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 326,000 | | | | 325,985 | |
Total U.S. Treasury Bills | | | | |
(Cost $325,867) | | | | | | | 325,985 | |
| REPURCHASE AGREEMENTS††- 76.3% |
Individual Repurchase Agreements6 | | | | | | | | |
Mizuho Financial Group, Inc.
issued 03/31/20 at (0.35)%
due 04/01/20 (secured by a U.S. Treasury Bond, at a rate of 2.00% and maturing 02/15/50 as collateral, with a value of $12,517,034) to be repurchased at $12,271,483 | | | 12,271,602 | | | | 12,271,602 | |
Barclays Capital
issued 03/31/20 at (0.50)%
due 04/01/20 (secured by a U.S. Treasury Bond, at a rate of 2.00% and maturing 02/15/50 as collateral, with a value of $11,086,125) to be repurchased at $10,868,599 | | | 10,868,750 | | | | 10,868,750 | |
Joint Repurchase Agreements5 | | | | | | | | |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | | 2,106,497 | | | | 2,106,497 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 810,191 | | | | 810,191 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $26,057,040) | | | | | | | 26,057,040 | |
| | | | | | | | | |
| Total Investments - 155.8% | | | | | | | | |
| (Cost $53,337,799) | | | | | | $ | 53,210,757 | |
| | | | | | | | | |
| U.S. Government Securities Sold Short†† - (73.8)% |
| U.S. Treasury Bonds |
| 2.00% due 02/15/50 | | | 21,700,000 | | | | (25,199,125 | ) |
| Total U.S. Government Securities Sold Short | | | | | | | | |
| (Proceeds $23,623,022) | | | | | | | (25,199,125 | ) |
| Other Assets & Liabilities, net - 18.0% | | | | | | | 6,156,169 | |
| Total Net Assets - 100.0% | | | | | | $ | 34,167,801 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Depreciation** | |
Interest Rate Futures Contracts Sold Short† |
U.S. Treasury Ultra Long Bond Futures Contracts | | | 48 | | | | Jun 2020 | | | $ | 10,671,000 | | | $ | (1,081,548 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 135 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as short security collateral at March 31, 2020. |
| | LIBOR — London Interbank Offered Rate |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 7,212,137 | | | $ | — | | | $ | — | | | $ | 7,212,137 | |
Federal Agency Notes | | | — | | | | 19,615,595 | | | | — | | | | 19,615,595 | |
U.S. Treasury Bills | | | — | | | | 325,985 | | | | — | | | | 325,985 | |
Repurchase Agreements | | | — | | | | 26,057,040 | | | | — | | | | 26,057,040 | |
Total Assets | | $ | 7,212,137 | | | $ | 45,998,620 | | | $ | — | | | $ | 53,210,757 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
U.S. Government Securities | | $ | — | | | $ | 25,199,125 | | | $ | — | | | $ | 25,199,125 | |
Interest Rate Futures Contracts** | | | 1,081,548 | | | | — | | | | — | | | | 1,081,548 | |
Total Liabilities | | $ | 1,081,548 | | | $ | 25,199,125 | | | $ | — | | | $ | 26,280,673 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
136 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 10,028,908 | | | $ | — | | | $ | (6,100,000 | ) | | $ | (486 | ) | | $ | (115,462 | ) | | $ | 3,812,960 | | | | 158,543 | | | $ | 232,782 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 4,778,021 | | | | 3,000,000 | | | | (4,300,000 | ) | | | (811 | ) | | | (78,033 | ) | | | 3,399,177 | | | | 347,920 | | | | 124,510 | |
| | | $ | 14,806,929 | | | $ | 3,000,000 | | | $ | (10,400,000 | ) | | $ | (1,297 | ) | | $ | (193,495 | ) | | $ | 7,212,137 | | | | | | | $ | 357,292 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 137 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $19,909,831) | | $ | 19,941,580 | |
Investments in affiliated issuers, at value (cost $7,370,928) | | | 7,212,137 | |
Repurchase agreements, at value (cost $26,057,040) | | | 26,057,040 | |
Cash | | | 2,338,345 | |
Segregated cash with broker | | | 347,643 | |
Receivables: |
Securities sold | | | 1,858,000 | |
Fund shares sold | | | 1,706,963 | |
Variation margin on futures contracts | | | 135,000 | |
Interest | | | 28,979 | |
Dividends | | | 15,170 | |
Total assets | | | 59,640,857 | |
| | | | | |
Liabilities: |
Securities sold short, at value (proceeds $23,623,022) | | | 25,199,125 | |
Payable for: |
Fund shares redeemed | | | 136,523 | |
Interest payable on short sales | | | 54,846 | |
Management fees | | | 22,410 | |
Transfer agent and administrative fees | | | 8,208 | |
Distribution and service fees | | | 3,851 | |
Portfolio accounting fees | | | 2,572 | |
Trustees” fees* | | | 694 | |
Miscellaneous | | | 44,827 | |
Total liabilities | | | 25,473,056 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 34,167,801 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 303,031,014 | |
Total distributable earnings (loss) | | | (268,863,213 | ) |
Net assets | | $ | 34,167,801 | |
| | | | | |
Investor Class: |
Net assets | | $ | 20,982,566 | |
Capital shares outstanding | | | 915,601 | |
Net asset value per share | | $ | 22.92 | |
| | | | | |
A-Class: |
Net assets | | $ | 4,831,991 | |
Capital shares outstanding | | | 220,425 | |
Net asset value per share | | $ | 21.92 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 23.01 | |
| | | | | |
C-Class: |
Net assets | | $ | 2,472,480 | |
Capital shares outstanding | | | 130,630 | |
Net asset value per share | | $ | 18.93 | |
| | | | | |
H-Class: |
Net assets | | $ | 5,880,764 | |
Capital shares outstanding | | | 267,662 | |
Net asset value per share | | $ | 21.97 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
138 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 357,292 | |
Interest | | | 1,470,573 | |
Total investment income | | | 1,827,865 | |
| | | | | |
Expenses: |
Management fees | | | 496,667 | |
Distribution and service fees: |
A-Class | | | 20,660 | |
C-Class | | | 44,796 | |
H-Class | | | 18,570 | |
Transfer agent and administrative fees | | | 139,742 | |
Short interest expense | | | 779,083 | |
Portfolio accounting fees | | | 55,185 | |
Professional fees | | | 24,354 | |
Trustees’ fees* | | | 14,907 | |
Custodian fees | | | 7,993 | |
Line of credit fees | | | 146 | |
Miscellaneous | | | 101,776 | |
Total expenses | | | 1,703,879 | |
Less: |
Expenses waived by Adviser | | | (12,351 | ) |
Net expenses | | | 1,691,528 | |
Net investment income | | | 136,337 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | $ | 25,744 | |
Investments in affiliated issuers | | | (1,297 | ) |
Investments sold short | | | (8,844,128 | ) |
Futures contracts | | | (5,344,875 | ) |
Net realized loss | | | (14,164,556 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 28,463 | |
Investments in affiliated issuers | | | (193,495 | ) |
Investments sold short | | | (267,904 | ) |
Futures contracts | | | (570,556 | ) |
Net change in unrealized appreciation (depreciation) | | | (1,003,492 | ) |
Net realized and unrealized loss | | | (15,168,048 | ) |
Net decrease in net assets resulting from operations | | $ | (15,031,711 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 139 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income (loss) | | $ | 136,337 | | | $ | (535,984 | ) |
Net realized loss on investments | | | (14,164,556 | ) | | | (3,798,045 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (1,003,492 | ) | | | 1,543,150 | |
Net decrease in net assets resulting from operations | | | (15,031,711 | ) | | | (2,790,879 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 196,858,764 | | | | 165,520,097 | |
A-Class | | | 1,089,420 | | | | 8,314,612 | |
C-Class | | | 286,088 | | | | 17,671,085 | |
H-Class | | | 268,283,102 | | | | 237,606,283 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (209,131,964 | ) | | | (199,019,343 | ) |
A-Class | | | (5,068,402 | ) | | | (10,860,881 | ) |
C-Class | | | (3,361,315 | ) | | | (28,733,779 | ) |
H-Class | | | (270,810,021 | ) | | | (232,371,577 | ) |
Net decrease from capital share transactions | | | (21,854,328 | ) | | | (41,873,503 | ) |
Net decrease in net assets | | | (36,886,039 | ) | | | (44,664,382 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 71,053,840 | | | | 115,718,222 | |
End of year | | $ | 34,167,801 | | | $ | 71,053,840 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 6,318,846 | | | | 4,681,218 | |
A-Class | | | 38,209 | | | | 248,177 | |
C-Class | | | 12,449 | | | | 597,564 | |
H-Class | | | 8,807,536 | | | | 7,029,926 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (6,707,268 | ) | | | (5,632,166 | ) |
A-Class | | | (177,343 | ) | | | (322,713 | ) |
C-Class | | | (133,163 | ) | | | (973,066 | ) |
H-Class | | | (8,840,423 | ) | | | (6,874,901 | ) |
Net decrease in shares | | | (681,157 | ) | | | (1,245,961 | ) |
140 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 33.09 | | | $ | 34.64 | | | $ | 36.02 | | | $ | 34.27 | | | $ | 35.78 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .12 | | | | (.13 | ) | | | (.56 | ) | | | (.88 | ) | | | (1.15 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.29 | ) | | | (1.42 | ) | | | (.82 | ) | | | 2.63 | | | | (.36 | ) |
Total from investment operations | | | (10.17 | ) | | | (1.55 | ) | | | (1.38 | ) | | | 1.75 | | | | (1.51 | ) |
Net asset value, end of period | | $ | 22.92 | | | $ | 33.09 | | | $ | 34.64 | | | $ | 36.02 | | | $ | 34.27 | |
|
Total Return | | | (30.73 | %) | | | (4.47 | %) | | | (3.83 | %) | | | 5.08 | % | | | (4.22 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 20,983 | | | $ | 43,149 | | | $ | 78,110 | | | $ | 84,123 | | | $ | 89,071 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.40 | % | | | (0.37 | %) | | | (1.63 | %) | | | (2.59 | %) | | | (3.07 | %) |
Total expensesb | | | 2.91 | % | | | 4.12 | % | | | 3.71 | % | | | 3.38 | % | | | 3.48 | % |
Net expensesc,f | | | 2.89 | % | | | 4.12 | % | | | 3.71 | % | | | 3.38 | % | | | 3.48 | % |
Portfolio turnover rate | | | 864 | % | | | 603 | % | | | 908 | % | | | 1,436 | % | | | 838 | % |
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 31.72 | | | $ | 33.30 | | | $ | 34.71 | | | $ | 33.11 | | | $ | 34.66 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .04 | | | | (.19 | ) | | | (.63 | ) | | | (.94 | ) | | | (1.20 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (9.84 | ) | | | (1.39 | ) | | | (.78 | ) | | | 2.54 | | | | (.35 | ) |
Total from investment operations | | | (9.80 | ) | | | (1.58 | ) | | | (1.41 | ) | | | 1.60 | | | | (1.55 | ) |
Net asset value, end of period | | $ | 21.92 | | | $ | 31.72 | | | $ | 33.30 | | | $ | 34.71 | | | $ | 33.11 | |
|
Total Returnd | | | (30.90 | %) | | | (4.74 | %) | | | (4.06 | %) | | | 4.83 | % | | | (4.47 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 4,832 | | | $ | 11,407 | | | $ | 14,455 | | | $ | 18,678 | | | $ | 17,676 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.15 | % | | | (0.57 | %) | | | (1.90 | %) | | | (2.85 | %) | | | (3.32 | %) |
Total expensesb | | | 3.17 | % | | | 4.38 | % | | | 3.97 | % | | | 3.67 | % | | | 3.75 | % |
Net expensesc,f | | | 3.15 | % | | | 4.37 | % | | | 3.97 | % | | | 3.67 | % | | | 3.75 | % |
Portfolio turnover rate | | | 864 | % | | | 603 | % | | | 908 | % | | | 1,436 | % | | | 838 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 141 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 27.60 | | | $ | 29.19 | | | $ | 30.65 | | | $ | 29.46 | | | $ | 31.07 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.15 | ) | | | (.43 | ) | | | (.77 | ) | | | (1.05 | ) | | | (1.31 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (8.52 | ) | | | (1.16 | ) | | | (.69 | ) | | | 2.24 | | | | (.30 | ) |
Total from investment operations | | | (8.67 | ) | | | (1.59 | ) | | | (1.46 | ) | | | 1.19 | | | | (1.61 | ) |
Net asset value, end of period | | $ | 18.93 | | | $ | 27.60 | | | $ | 29.19 | | | $ | 30.65 | | | $ | 29.46 | |
|
Total Returnd | | | (31.41 | %) | | | (5.45 | %) | | | (4.76 | %) | | | 4.04 | % | | | (5.18 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,472 | | | $ | 6,937 | | | $ | 18,296 | | | $ | 23,343 | | | $ | 27,899 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.59 | %) | | | (1.44 | %) | | | (2.63 | %) | | | (3.59 | %) | | | (4.08 | %) |
Total expensesb | | | 3.93 | % | | | 5.14 | % | | | 4.71 | % | | | 4.41 | % | | | 4.50 | % |
Net expensesc,f | | | 3.91 | % | | | 5.13 | % | | | 4.71 | % | | | 4.41 | % | | | 4.50 | % |
Portfolio turnover rate | | | 864 | % | | | 603 | % | | | 908 | % | | | 1,436 | % | | | 838 | % |
142 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 31.81 | | | $ | 33.38 | | | $ | 34.83 | | | $ | 33.12 | | | $ | 34.67 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .05 | | | | (.20 | ) | | | (.65 | ) | | | (.92 | ) | | | (1.15 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (9.89 | ) | | | (1.37 | ) | | | (.80 | ) | | | 2.63 | | | | (.40 | ) |
Total from investment operations | | | (9.84 | ) | | | (1.57 | ) | | | (1.45 | ) | | | 1.71 | | | | (1.55 | ) |
Net asset value, end of period | | $ | 21.97 | | | $ | 31.81 | | | $ | 33.38 | | | $ | 34.83 | | | $ | 33.12 | |
|
Total Return | | | (30.93 | %) | | | (4.70 | %) | | | (4.16 | %) | | | 5.13 | % | | | (4.47 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 5,881 | | | $ | 9,561 | | | $ | 4,858 | | | $ | 43,784 | | | $ | 72,833 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.16 | % | | | (0.58 | %) | | | (1.94 | %) | | | (2.80 | %) | | | (3.17 | %) |
Total expensesb | | | 3.30 | % | | | 4.37 | % | | | 4.00 | % | | | 3.60 | % | | | 3.61 | % |
Net expensesc,f | | | 3.28 | % | | | 4.36 | % | | | 4.00 | % | | | 3.60 | % | | | 3.61 | % |
Portfolio turnover rate | | | 872 | % | | | 603 | % | | | 908 | % | | | 1,436 | % | | | 838 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Does not include expenses of the underlying funds in which the Fund invests. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Total return does not reflect the impact of any applicable sales charges. |
e | Total expenses may include interest expense related to short sales. Excluding interest expense, the operating expense ratios for the years presented were as follows: |
| | | 03/31/2020 | 03/31/2019 | 03/29/2018 | 03/31/2017 | 03/31/2016 |
| | Investor class | 1.50% | 1.50% | 1.43% | 1.43% | 1.40% |
| | A-Class | 1.75% | 1.75% | 1.68% | 1.63% | 1.65% |
| | C-Class | 2.50% | 2.50% | 2.43% | 2.43% | 2.40% |
| | H-Class | 1.75% | 1.75% | 1.68% | 1.68% | 1.65% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 143 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
HIGH YIELD STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of the high yield bond market.
For the one-year period ended March 31, 2020, High Yield Strategy Fund H-Class returned -5.73%. For comparison, the Bloomberg Barclays U.S. Corporate High Yield Index returned -6.94% for the same period.
The Fund primarily invests in credit default swaps to gain exposure similar to the high yield bond market. Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. When holding a credit default swap, the Fund is either buying or selling credit protection. A buyer of credit protection is seeking to mitigate risk and a seller of credit protection is assuming credit risk. The Fund will normally be a seller of credit protection (assuming credit risk) as it seeks to gain exposure to the high yield bond market. In addition, the Fund may invest in bond futures for the purpose of managing duration risk. For cash management purposes, the Fund may invest in other fixed income securities and money market instruments.
The high yield market performed well for the first nine months of the period, supported by the phase one trade deal with China, and decreased fears of an economic slowdown following a series of rate cuts from the Federal Reserve. The coronavirus outbreak in 2020 reversed the trend, as first quarter returns in the high yield market were the weakest since the Financial Crisis. The Fed cut rates by 125 basis points in the first quarter and implemented a series of liquidity programs to support commercial loans, mortgages, corporations, and municipalities. On April 9, 2020, subsequent to period end, the Fed also agreed to buy bonds from recent fallen angels, adding a strong technical tailwind to the market.
By spread measures, corporate bonds now appear cheap. Current credit spreads have only been wider 10-15% of the time. We are in a value zone not seen since 2009, with a greater probability for spreads to tighten from here. But in the current scenario, with little visibility on the full earnings impact of the economic shutdown from COVID-19, there is risk for additional downside. High yield corporate bonds entered this downturn with weaker earnings growth and a higher leverage ratio than in September 2008. The U.S. speculative-grade default rate could peak between 15 percent and 20 percent in this cycle; higher than the peaks during the 1990, 2002, and 2009 recessions.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
144 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(continued) | March 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Dates: |
A-Class | April 16, 2007 |
C-Class | April 16, 2007 |
H-Class | April 16, 2007 |
The Fund invests principally in derivative investments such as high yield credit default swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund III | 9.7% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 6.8% |
Guggenheim Strategy Fund II | 2.5% |
Total | 19.0% |
| | |
“Largest Holdings” excludes any temporary cash or derivative investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 145 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (5.76%) | 2.56% | 5.85% |
A-Class Shares with sales charge‡ | (10.23%) | 1.56% | 5.33% |
C-Class Shares | (6.45%) | 1.75% | 5.05% |
C-Class Shares with CDSC§ | (7.34%) | 1.75% | 5.05% |
H-Class Shares | (5.73%) | 2.48% | 5.85% |
Bloomberg Barclays U.S. Corporate High Yield Index | (6.94%) | 2.78% | 5.64% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Corporate High Yield Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
146 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
HIGH YIELD STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 19.0% |
Guggenheim Strategy Fund III1 | | | 112,348 | | | $ | 2,704,221 | |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 195,255 | | | | 1,907,641 | |
Guggenheim Strategy Fund II1 | | | 28,786 | | | | 692,308 | |
Total Mutual Funds | | | | |
(Cost $5,431,930) | | | | | | | 5,304,170 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 26.8% |
Farmer Mac |
0.24% (Fed Funds Effective Rate + 0.15%, Rate Floor: 0.00%) due 09/23/202 | | $ | 5,000,000 | | | | 4,999,522 | |
Federal Farm Credit Bank |
0.38% (3 Month U.S. Treasury Bill Rate + 0.29%, Rate Floor: 0.00%) due 04/11/222 | | | 2,500,000 | | | | 2,495,910 | |
Total Federal Agency Notes | | | | |
(Cost $7,500,000) | | | | | | | 7,495,432 | |
| | | | | | | | | |
U.S. TREASURY BILLS†† - 4.0% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 1,117,000 | | | | 1,116,950 | |
Total U.S. Treasury Bills | | | | |
(Cost $1,116,543) | | | | | | | 1,116,950 | |
| | | | | | | | | |
| REPURCHASE AGREEMENTS††,5- 27.1% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | | 5,455,768 | | | | 5,455,768 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 2,098,372 | | | | 2,098,372 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $7,554,140) | | | | | | | 7,554,140 | |
| | | | | | | | | |
| Total Investments - 76.9% | | | | | | | | |
| (Cost $21,602,613) | | | | | | $ | 21,470,692 | |
| Other Assets & Liabilities, net - 23.1% | | | | | | | 6,453,558 | |
| Total Net Assets - 100.0% | | | | | | $ | 27,924,250 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Interest Rate Futures Contracts Purchased† |
U.S. Treasury 5 Year Note Futures Contracts | | | 132 | | | | Jun 2020 | | | $ | 16,555,688 | | | $ | 301,972 | |
Centrally Cleared Credit Default Swap Agreements Protection Sold†† |
| |
Counterparty | Exchange | Index | | Protection
Premium
Rate | | Payment
Frequency | | Maturity
Date | | | Notional
Amount | | | Value | | | Upfront
Premiums
Received | | | Unrealized
Depreciation** | |
Barclays Bank plc | ICE | CDX.NA.HY.34 | | | 5.00 | % | Quarterly | 06/20/25 | | $ | 9,750,000 | | | $ | (643,013 | ) | | $ | (465,457 | ) | | $ | (177,556 | ) |
Goldman Sachs International | ICE | CDX.NA.HY.34 | | | 5.00 | % | Quarterly | 06/20/25 | | | 14,800,000 | | | | (976,060 | ) | | | (672,049 | ) | | | (304,011 | ) |
| | | | | | | | | | | | | | | | | | $ | (1,619,073 | ) | | $ | (1,137,506 | ) | | $ | (481,567 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 147 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
HIGH YIELD STRATEGY FUND | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation | |
OTC Credit Index Swap Agreements†† |
Goldman Sachs International | iShares iBoxx $ High Yield Corporate Bond ETF | 1.03% (1 Week USD LIBOR + 0.35%) | At Maturity | | | 04/29/20 | | | | 15,944 | | | $ | 1,228,804 | | | $ | 89,446 | |
BNP Paribas | iShares iBoxx $ High Yield Corporate Bond ETF | 0.79% (1 Month USD LIBOR - 0.20%) | At Maturity | | | 04/29/20 | | | | 45,287 | | | | 3,490,291 | | | | 7,299 | |
| | | | | | | | | | | | | | $ | 4,719,095 | | | $ | 96,745 | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures and credit default swap collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as credit index swap collateral at March 31, 2020. |
| | CDX.NA.HY.34 Index — Credit Default Swap North American High Yield Series 34 Index |
| | ICE — Intercontinental Exchange |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 5,304,170 | | | $ | — | | | $ | — | | | $ | 5,304,170 | |
Federal Agency Notes | | | — | | | | 7,495,432 | | | | — | | | | 7,495,432 | |
U.S. Treasury Bills | | | — | | | | 1,116,950 | | | | — | | | | 1,116,950 | |
Repurchase Agreements | | | — | | | | 7,554,140 | | | | — | | | | 7,554,140 | |
Interest Rate Futures Contracts** | | | 301,972 | | | | — | | | | — | | | | 301,972 | |
Credit Index Swap Agreements** | | | — | | | | 96,745 | | | | — | | | | 96,745 | |
Total Assets | | $ | 5,606,142 | | | $ | 16,263,267 | | | $ | — | | | $ | 21,869,409 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Credit Default Swap Agreements** | | $ | — | | | $ | 481,567 | | | $ | — | | | $ | 481,567 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
148 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
HIGH YIELD STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 9,083,393 | | | $ | — | | | $ | (8,380,001 | ) | | $ | 36,050 | | | $ | (47,134 | ) | | $ | 692,308 | | | | 28,786 | | | $ | 238,645 | |
Guggenheim Strategy Fund III | | | 7,280,075 | | | | — | | | | (4,500,001 | ) | | | (13,920 | ) | | | (61,933 | ) | | | 2,704,221 | | | | 112,348 | | | | 193,896 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 7,059,670 | | | | — | | | | (5,100,000 | ) | | | (25,135 | ) | | | (26,894 | ) | | | 1,907,641 | | | | 195,255 | | | | 150,925 | |
| | | $ | 23,423,138 | | | $ | — | | | $ | (17,980,002 | ) | | $ | (3,005 | ) | | $ | (135,961 | ) | | $ | 5,304,170 | | | | | | | $ | 583,466 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 149 |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $8,616,543) | | $ | 8,612,382 | |
Investments in affiliated issuers, at value (cost $5,431,930) | | | 5,304,170 | |
Repurchase agreements, at value (cost $7,554,140) | | | 7,554,140 | |
Cash | | | 5,825,639 | |
Segregated cash with broker | | | 2,310,805 | |
Unrealized appreciation on OTC swap agreements | | | 96,745 | |
Receivables: |
Fund shares sold | | | 36,000 | |
Dividends | | | 20,619 | |
Protection fees on credit default swap agreements | | | 41,417 | |
Interest | | | 8,420 | |
Variation margin on futures contracts | | | 2,148 | |
Total assets | | | 29,812,485 | |
| | | | | |
Liabilities: |
Unamortized upfront premiums received on credit default swap agreements | | | 1,137,506 | |
Payable for: |
Variation margin on credit default swap agreements | | | 435,331 | |
Fund shares redeemed | | | 221,088 | |
Securities purchased | | | 19,214 | |
Management fees | | | 15,467 | |
Transfer agent and administrative fees | | | 8,454 | |
Distribution and service fees | | | 6,034 | |
Portfolio accounting fees | | | 2,174 | |
Trustees’ fees* | | | 625 | |
Swap settlement | | | 493 | |
Miscellaneous | | | 41,849 | |
Total liabilities | | | 1,888,235 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 27,924,250 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 38,624,265 | |
Total distributable earnings (loss) | | | (10,700,015 | ) |
Net assets | | $ | 27,924,250 | |
| | | | | |
A-Class: |
Net assets | | $ | 3,932,994 | |
Capital shares outstanding | | | 180,950 | |
Net asset value per share | | $ | 21.74 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 22.82 | |
| | | | | |
C-Class: |
Net assets | | $ | 865,923 | |
Capital shares outstanding | | | 46,079 | |
Net asset value per share | | $ | 18.79 | |
| | | | | |
H-Class: |
Net assets | | $ | 23,125,333 | |
Capital shares outstanding | | | 1,065,338 | |
Net asset value per share | | $ | 21.71 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 583,466 | |
Interest | | | 1,299,295 | |
Total investment income | | | 1,882,761 | |
| | | | | |
Expenses: |
Management fees | | | 643,679 | |
Distribution and service fees: |
A-Class | | | 14,085 | |
C-Class | | | 11,727 | |
H-Class | | | 197,543 | |
Transfer agent and administrative fees | | | 217,579 | |
Portfolio accounting fees | | | 85,823 | |
Registration fees | | | 77,110 | |
Professional fees | | | 22,193 | |
Trustees’ fees* | | | 19,062 | |
Custodian fees | | | 12,298 | |
Line of credit fees | | | 1,019 | |
Miscellaneous | | | 102,487 | |
Total expenses | | | 1,404,605 | |
Less: |
Expenses waived by Adviser |
Total waived expenses | | | (15,558 | ) |
Net expenses | | | 1,389,047 | |
Net investment income | | | 493,714 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 83,475 | |
Investments in affiliated issuers | | | (3,005 | ) |
Swap agreements | | | (2,538,854 | ) |
Futures contracts | | | 3,976,983 | |
Net realized gain | | | 1,518,599 | |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 10,513 | |
Investments in affiliated issuers | | | (135,961 | ) |
Swap agreements | | | (1,085,704 | ) |
Futures contracts | | | (587,391 | ) |
Net change in unrealized appreciation (depreciation) | | | (1,798,543 | ) |
Net realized and unrealized loss | | | (279,944 | ) |
Net increase in net assets resulting from operations | | $ | 213,770 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
150 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 493,714 | | | $ | 898,884 | |
Net realized gain on investments | | | 1,518,599 | | | | 2,382,426 | |
Net change in unrealized appreciation (depreciation) on investments | | | (1,798,543 | ) | | | 1,275,885 | |
Net increase in net assets resulting from operations | | | 213,770 | | | | 4,557,195 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (196,039 | ) | | | (200,150 | ) |
C-Class | | | (45,921 | ) | | | (81,621 | ) |
H-Class | | | (3,642,315 | ) | | | (6,085,861 | ) |
Total distributions to shareholders | | | (3,884,275 | ) | | | (6,367,632 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 6,892,359 | | | | 33,024,074 | |
C-Class | | | 1,043,362 | | | | 3,722,190 | |
H-Class | | | 285,721,192 | | | | 701,551,211 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 182,416 | | | | 192,319 | |
C-Class | | | 40,065 | | | | 71,233 | |
H-Class | | | 3,613,386 | | | | 6,071,177 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (10,370,325 | ) | | | (34,350,620 | ) |
C-Class | | | (1,586,654 | ) | | | (6,368,793 | ) |
H-Class | | | (364,232,406 | ) | | | (628,092,339 | ) |
Net increase (decrease) from capital share transactions | | | (78,696,605 | ) | | | 75,820,452 | |
Net increase (decrease) in net assets | | | (82,367,110 | ) | | | 74,010,015 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 110,291,360 | | | | 36,281,345 | |
End of year | | $ | 27,924,250 | | | $ | 110,291,360 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 280,707 | | | | 1,392,434 | |
C-Class | | | 48,337 | | | | 179,332 | |
H-Class | | | 11,575,525 | | | | 29,879,785 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 7,479 | | | | 8,472 | |
C-Class | | | 1,895 | | | | 3,572 | |
H-Class | | | 148,333 | | | | 267,807 | |
Shares redeemed | | | | | | | | |
A-Class | | | (423,937 | ) | | | (1,446,445 | ) |
C-Class | | | (74,217 | ) | | | (306,384 | ) |
H-Class | | | (14,863,288 | ) | | | (26,969,778 | ) |
Net increase (decrease) in shares | | | (3,299,166 | ) | | | 3,008,795 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 151 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 24.10 | | | $ | 23.26 | | | $ | 24.74 | | | $ | 23.32 | | | $ | 23.84 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .14 | | | | .14 | | | | (.08 | ) | | | (.20 | ) | | | (.09 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.41 | ) | | | 1.49 | | | | .62 | | | | 2.09 | | | | .46 | |
Total from investment operations | | | (1.27 | ) | | | 1.63 | | | | .54 | | | | 1.89 | | | | .37 | |
Less distributions from: |
Net investment income | | | (1.09 | ) | | | (.79 | ) | | | (1.66 | ) | | | (.47 | ) | | | (.89 | ) |
Net realized gains | | | — | | | | — | | | | (.36 | ) | | | — | | | | — | |
Total distributions | | | (1.09 | ) | | | (.79 | ) | | | (2.02 | ) | | | (.47 | ) | | | (.89 | ) |
Net asset value, end of period | | $ | 21.74 | | | $ | 24.10 | | | $ | 23.26 | | | $ | 24.74 | | | $ | 23.32 | |
|
Total Returnb | | | (5.76 | %) | | | 7.18 | % | | | 2.08 | % | | | 8.24 | % | | | 1.66 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,933 | | | $ | 7,631 | | | $ | 8,427 | | | $ | 20,290 | | | $ | 11,787 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.58 | % | | | 0.59 | % | | | (0.31 | %) | | | (0.85 | %) | | | (0.40 | %) |
Total expensesc | | | 1.63 | % | | | 1.61 | % | | | 1.52 | % | | | 1.51 | % | | | 1.49 | % |
Net expensesd | | | 1.61 | % | | | 1.60 | % | | | 1.52 | % | | | 1.51 | % | | | 1.49 | % |
Portfolio turnover rate | | | — | | | | 21 | % | | | 422 | % | | | 97 | % | | | 521 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 21.12 | | | $ | 20.63 | | | $ | 22.33 | | | $ | 21.25 | | | $ | 22.01 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.04 | ) | | | (.04 | ) | | | (.22 | ) | | | (.36 | ) | | | (.19 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.20 | ) | | | 1.32 | | | | .54 | | | | 1.91 | | | | .32 | |
Total from investment operations | | | (1.24 | ) | | | 1.28 | | | | .32 | | | | 1.55 | | | | .13 | |
Less distributions from: |
Net investment income | | | (1.09 | ) | | | (.79 | ) | | | (1.66 | ) | | | (.47 | ) | | | (.89 | ) |
Net realized gains | | | — | | | | — | | | | (.36 | ) | | | — | | | | — | |
Total distributions | | | (1.09 | ) | | | (.79 | ) | | | (2.02 | ) | | | (.47 | ) | | | (.89 | ) |
Net asset value, end of period | | $ | 18.79 | | | $ | 21.12 | | | $ | 20.63 | | | $ | 22.33 | | | $ | 21.25 | |
|
Total Returnb | | | (6.45 | %) | | | 6.39 | % | | | 1.35 | % | | | 7.38 | % | | | 0.70 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 866 | | | $ | 1,480 | | | $ | 3,994 | | | $ | 4,533 | | | $ | 2,020 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.20 | %) | | | (0.21 | %) | | | (1.00 | %) | | | (1.65 | %) | | | (0.88 | %) |
Total expensesc | | | 2.38 | % | | | 2.35 | % | | | 2.27 | % | | | 2.26 | % | | | 2.24 | % |
Net expensesd | | | 2.36 | % | | | 2.35 | % | | | 2.27 | % | | | 2.26 | % | | | 2.24 | % |
Portfolio turnover rate | | | — | | | | 21 | % | | | 422 | % | | | 97 | % | | | 521 | % |
152 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 24.06 | | | $ | 23.23 | | | $ | 24.72 | | | $ | 23.31 | | | $ | 23.90 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .15 | | | | .12 | | | | (.10 | ) | | | (.18 | ) | | | (.15 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.41 | ) | | | 1.50 | | | | .63 | | | | 2.06 | | | | .45 | |
Total from investment operations | | | (1.26 | ) | | | 1.62 | | | | .53 | | | | 1.88 | | | | .30 | |
Less distributions from: |
Net investment income | | | (1.09 | ) | | | (.79 | ) | | | (1.66 | ) | | | (.47 | ) | | | (.89 | ) |
Net realized gains | | | — | | | | — | | | | (.36 | ) | | | — | | | | — | |
Total distributions | | | (1.09 | ) | | | (.79 | ) | | | (2.02 | ) | | | (.47 | ) | | | (.89 | ) |
Net asset value, end of period | | $ | 21.71 | | | $ | 24.06 | | | $ | 23.23 | | | $ | 24.72 | | | $ | 23.31 | |
|
Total Return | | | (5.73 | %) | | | 7.15 | % | | | 2.08 | % | | | 8.15 | % | | | 1.36 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 23,125 | | | $ | 101,180 | | | $ | 23,860 | | | $ | 435,334 | | | $ | 783,018 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.59 | % | | | 0.49 | % | | | (0.41 | %) | | | (0.74 | %) | | | (0.64 | %) |
Total expensesc | | | 1.63 | % | | | 1.60 | % | | | 1.52 | % | | | 1.51 | % | | | 1.49 | % |
Net expensesd | | | 1.61 | % | | | 1.60 | % | | | 1.52 | % | | | 1.51 | % | | | 1.49 | % |
Portfolio turnover rate | | | — | | | | 21 | % | | | 422 | % | | | 97 | % | | | 521 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 153 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INVERSE HIGH YIELD STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that inversely correlate, before fees and expenses, to the performance of the high yield bond market.
For the one-year period ended March 31, 2020, Inverse High Yield Strategy Fund H-Class returned 2.39%. For comparison, the Bloomberg Barclays U.S. Corporate High Yield Index returned -6.94% for the same period.
The high yield market performed well for the first nine months of the period, supported by the phase one trade deal with China, and decreased fears of an economic slowdown following a series of rate cuts from the Federal Reserve. The coronavirus outbreak in 2020 reversed the trend, as first quarter returns in the high yield market were the weakest since the Financial Crisis. The Fed cut rates by 125 basis points in the first quarter and implemented a series of liquidity programs to support commercial loans, mortgages, corporations, and municipalities. On April 9, 2020, subsequent to period end, the Fed also agreed to buy bonds from recent fallen angels, adding a strong technical tailwind to the market.
By spread measures, corporate bonds now appear cheap. Current credit spreads have only been wider 10-15% of the time. We are in a value zone not seen since 2009, with a greater probability for spreads to tighten from here. But in the current scenario, with little visibility on the full earnings impact of the economic shutdown from COVID-19, there is risk for additional downside. High yield corporate bonds entered this downturn with weaker earnings growth and a higher leverage ratio than in September 2008. The U.S. speculative-grade default rate could peak between 15 percent and 20 percent in this cycle; higher than the peaks during the 1990, 2002, and 2009 recessions.
Derivatives in the Fund are used to help provide inverse exposure to the composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles detracted from Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
154 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | April 16, 2007 |
C-Class | April 16, 2007 |
H-Class | April 16, 2007 |
The Fund invests principally in derivative investments such as high yield credit default swap agreements and futures contracts.
Cumulative Fund Performance*
Largest Holdings (% of Total Net Assets) |
Guggenheim Ultra Short Duration Fund — Institutional Class | 11.0% |
Guggenheim Strategy Fund II | 10.9% |
Total | 21.9% |
| | |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 2.56% | (4.22%) | (8.70%) |
A-Class Shares with sales charge‡ | (2.31%) | (5.15%) | (9.14%) |
C-Class Shares | 1.54% | (5.02%) | (9.35%) |
C-Class Shares with CDSC§ | 0.54% | (5.02%) | (9.35%) |
H-Class Shares | 2.39% | (4.03%) | (8.51%) |
Bloomberg Barclays U.S. Corporate High Yield Index | (6.94%) | 2.78% | 5.64% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Corporate High Yield Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 155 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE HIGH YIELD STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 21.9% |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 158,743 | | | $ | 1,550,914 | |
Guggenheim Strategy Fund II1 | | | 63,948 | | | | 1,537,959 | |
Total Mutual Funds | | | | |
(Cost $3,169,213) | | | | | | | 3,088,873 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 3.2% |
Federal Farm Credit Bank |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | | $ | 250,000 | | | | 250,551 | |
0.38% (3 Month U.S. Treasury Bill Rate + 0.29%, Rate Floor: 0.00%) due 04/11/222 | | | 200,000 | | | | 199,673 | |
Total Federal Agency Notes | | | | |
(Cost $450,000) | | | | | | | 450,224 | |
| | | | | | | | | |
U.S. TREASURY BILLS†† - 0.6% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 83,000 | | | | 82,997 | |
Total U.S. Treasury Bills | | | | |
(Cost $82,966) | | | | | | | 82,997 | |
| REPURCHASE AGREEMENTS††,5- 17.0% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | | 1,730,193 | | | | 1,730,193 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 665,459 | | | | 665,459 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $2,395,652) | | | | | | | 2,395,652 | |
| | | | | | | | | |
| Total Investments - 42.7% | | | | | | | | |
| (Cost $6,097,831) | | | | | | $ | 6,017,746 | |
| Other Assets & Liabilities, net - 57.3% | | | | | | | 8,079,475 | |
| Total Net Assets - 100.0% | | | | | | $ | 14,097,221 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Depreciation** | |
Interest Rate Futures Contracts Sold Short† |
U.S. Treasury 5 Year Note Futures Contracts | | | 81 | | | | Jun 2020 | | | $ | 10,159,172 | | | $ | (35,612 | ) |
Centrally Cleared Credit Default Swap Agreements Protection Purchased†† |
| |
Counterparty | Exchange | Index | | Protection
Premium Rate | | Payment
Frequency | | Maturity
Date | | | Notional
Amount | | | Value | | | Upfront
Premiums
Paid | | | Unrealized
Appreciation** | |
Barclays Bank plc | ICE | CDX.NA.HY.34 | | | 5.00 | % | Quarterly | 06/20/25 | | $ | 15,050,000 | | | $ | 992,548 | | | $ | 837,053 | | | $ | 155,495 | |
156 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
INVERSE HIGH YIELD STRATEGY FUND | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
| | CDX.NA.HY.34 — Credit Default Swap North American High Yield Series 34 Index |
| | ICE — Intercontinental Exchange |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 3,088,873 | | | $ | — | | | $ | — | | | $ | 3,088,873 | |
Federal Agency Notes | | | — | | | | 450,224 | | | | — | | | | 450,224 | |
U.S. Treasury Bills | | | — | | | | 82,997 | | | | — | | | | 82,997 | |
Repurchase Agreements | | | — | | | | 2,395,652 | | | | — | | | | 2,395,652 | |
Credit Default Swap Agreements** | | | — | | | | 155,495 | | | | — | | | | 155,495 | |
Total Assets | | $ | 3,088,873 | | | $ | 3,084,368 | | | $ | — | | | $ | 6,173,241 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Interest Rate Futures Contracts** | | $ | 35,612 | | | $ | — | | | $ | — | | | $ | 35,612 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 157 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INVERSE HIGH YIELD STRATEGY FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 953,049 | | | $ | 1,580,000 | | | $ | (945,000 | ) | | $ | 351 | | | $ | (50,441 | ) | | $ | 1,537,959 | | | | 63,948 | | | $ | 15,210 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 958,824 | | | | 2,050,017 | | | | (1,425,000 | ) | | | 1,526 | | | | (34,453 | ) | | | 1,550,914 | | | | 158,743 | | | | 7,965 | |
| | | $ | 1,911,873 | | | $ | 3,630,017 | | | $ | (2,370,000 | ) | | $ | 1,877 | | | $ | (84,894 | ) | | $ | 3,088,873 | | | | | | | $ | 23,175 | |
158 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE HIGH YIELD STRATEGY FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $532,966) | | $ | 533,221 | |
Investments in affiliated issuers, at value (cost $3,169,213) | | | 3,088,873 | |
Repurchase agreements, at value (cost $2,395,652) | | | 2,395,652 | |
Cash | | | 1,920,624 | |
Segregated cash with broker | | | 118,825 | |
Unamortized upfront premiums paid on credit default swap agreements | | | 837,053 | |
Receivables: |
Fund shares sold | | | 5,507,170 | |
Variation margin on credit default swap agreements | | | 159,126 | |
Dividends | | | 4,425 | |
Interest | | | 725 | |
Total assets | | | 14,565,694 | |
| | | | | |
Liabilities: |
Payable for: |
Swap settlement | | | 398,062 | |
Protection fees on credit default swap agreements | | | 25,083 | |
Management fees | | | 9,937 | |
Transfer agent and administrative fees | | | 3,719 | |
Distribution and service fees | | | 3,605 | |
Portfolio accounting fees | | | 1,356 | |
Variation margin on futures contracts | | | 888 | |
Trustees’ fees* | | | 399 | |
Miscellaneous | | | 25,424 | |
Total liabilities | | | 468,473 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 14,097,221 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 23,400,421 | |
Total distributable earnings (loss) | | | (9,303,200 | ) |
Net assets | | $ | 14,097,221 | |
| | | | | |
A-Class: |
Net assets | | $ | 256,304 | |
Capital shares outstanding | | | 4,133 | |
Net asset value per share | | $ | 62.01 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 65.10 | |
| | | | | |
C-Class: |
Net assets | | $ | 361,534 | |
Capital shares outstanding | | | 6,385 | |
Net asset value per share | | $ | 56.62 | |
| | | | | |
H-Class: |
Net assets | | $ | 13,479,383 | |
Capital shares outstanding | | | 212,450 | |
Net asset value per share | | $ | 63.45 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 23,175 | |
Interest | | | 59,703 | |
Total investment income | | | 82,878 | |
| | | | | |
Expenses: |
Management fees | | | 33,906 | |
Distribution and service fees: |
A-Class | | | 2,529 | |
C-Class | | | 4,588 | |
H-Class | | | 7,626 | |
Transfer agent and administrative fees | | | 11,632 | |
Portfolio accounting fees | | | 4,521 | |
Registration fees | | | 3,959 | |
Professional fees | | | 1,949 | |
Trustees’ fees* | | | 1,072 | |
Custodian fees | | | 643 | |
Miscellaneous | | | 4,364 | |
Total expenses | | | 76,789 | |
Less: |
Expenses waived by Adviser | | | (812 | ) |
Net expenses | | | 75,977 | |
Net investment income | | | 6,901 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | (24 | ) |
Investments in affiliated issuers | | | 1,877 | |
Swap agreements | | | 995,167 | |
Futures contracts | | | (533,698 | ) |
Net realized gain | | | 463,322 | |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 528 | |
Investments in affiliated issuers | | | (84,894 | ) |
Swap agreements | | | 183,741 | |
Futures contracts | | | 18,663 | |
Net change in unrealized appreciation (depreciation) | | | 118,038 | |
Net realized and unrealized gain | | | 581,360 | |
Net increase in net assets resulting from operations | | $ | 588,261 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 159 |
INVERSE HIGH YIELD STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 6,901 | | | $ | 39,322 | |
Net realized gain (loss) on investments | | | 463,322 | | | | (439,576 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | 118,038 | | | | (31,984 | ) |
Net increase (decrease) in net assets resulting from operations | | | 588,261 | | | | (432,238 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 43,047,779 | | | | 22,769,190 | |
C-Class | | | 40,360 | | | | 1,045,645 | |
H-Class | | | 120,594,884 | | | | 67,200,629 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (43,306,242 | ) | | | (31,262,861 | ) |
C-Class | | | (411,911 | ) | | | (1,031,000 | ) |
H-Class | | | (112,151,071 | ) | | | (70,863,890 | ) |
Net increase (decrease) from capital share transactions | | | 7,813,799 | | | | (12,142,287 | ) |
Net increase (decrease) in net assets | | | 8,402,060 | | | | (12,574,525 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 5,695,161 | | | | 18,269,686 | |
End of year | | $ | 14,097,221 | | | $ | 5,695,161 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 731,426 | | | | 358,058 | |
C-Class | | | 724 | | | | 17,880 | |
H-Class | | | 1,978,712 | | | | 1,026,778 | |
Shares redeemed | | | | | | | | |
A-Class | | | (731,958 | ) | | | (489,454 | ) |
C-Class | | | (7,581 | ) | | | (17,510 | ) |
H-Class | | | (1,841,697 | ) | | | (1,084,207 | ) |
Net increase (decrease) in shares | | | 129,626 | | | | (188,455 | ) |
160 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE HIGH YIELD STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 60.47 | | | $ | 64.28 | | | $ | 65.78 | | | $ | 71.69 | | | $ | 76.94 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .24 | | | | .42 | | | | (.07 | ) | | | (.51 | ) | | | (.80 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 1.30 | | | | (4.23 | ) | | | (1.43 | ) | | | (5.40 | ) | | | (4.45 | ) |
Total from investment operations | | | 1.54 | | | | (3.81 | ) | | | (1.50 | ) | | | (5.91 | ) | | | (5.25 | ) |
Net asset value, end of period | | $ | 62.01 | | | $ | 60.47 | | | $ | 64.28 | | | $ | 65.78 | | | $ | 71.69 | |
|
Total Returnb | | | 2.56 | % | | | (5.93 | %) | | | (2.28 | %) | | | (8.26 | %) | | | (6.81 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 256 | | | $ | 282 | | | $ | 8,746 | | | $ | 915 | | | $ | 2,642 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.40 | % | | | 0.66 | % | | | (0.12 | %) | | | (0.74 | %) | | | (1.07 | %) |
Total expensesc | | | 1.62 | % | | | 1.60 | % | | | 1.52 | % | | | 1.52 | % | | | 1.50 | % |
Net expensesd | | | 1.61 | % | | | 1.60 | % | | | 1.52 | % | | | 1.52 | % | | | 1.50 | % |
Portfolio turnover rate | | | 254 | % | | | — | | | | 41 | % | | | 480 | % | | | 1,722 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 55.76 | | | $ | 59.73 | | | $ | 61.63 | | | $ | 67.67 | | | $ | 73.24 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.05 | ) | | | .01 | | | | (.39 | ) | | | (.85 | ) | | | (1.16 | ) |
Net gain (loss) on investments (realized and unrealized) | | | .91 | | | | (3.98 | ) | | | (1.51 | ) | | | (5.19 | ) | | | (4.41 | ) |
Total from investment operations | | | .86 | | | | (3.97 | ) | | | (1.90 | ) | | | (6.04 | ) | | | (5.57 | ) |
Net asset value, end of period | | $ | 56.62 | | | $ | 55.76 | | | $ | 59.73 | | | $ | 61.63 | | | $ | 67.67 | |
|
Total Returnb | | | 1.54 | % | | | (6.65 | %) | | | (3.08 | %) | | | (8.97 | %) | | | (7.59 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 362 | | | $ | 738 | | | $ | 769 | | | $ | 1,042 | | | $ | 1,653 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.09 | %) | | | 0.02 | % | | | (0.65 | %) | | | (1.32 | %) | | | (1.60 | %) |
Total expensesc | | | 2.37 | % | | | 2.36 | % | | | 2.27 | % | | | 2.27 | % | | | 2.25 | % |
Net expensesd | | | 2.34 | % | | | 2.35 | % | | | 2.27 | % | | | 2.27 | % | | | 2.25 | % |
Portfolio turnover rate | | | 254 | % | | | — | | | | 41 | % | | | 480 | % | | | 1,722 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 161 |
INVERSE HIGH YIELD STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 61.97 | | | $ | 65.89 | | | $ | 67.70 | | | $ | 72.70 | | | $ | 77.91 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .06 | | | | .41 | | | | (.12 | ) | | | (.74 | ) | | | (.64 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 1.42 | | | | (4.33 | ) | | | (1.69 | ) | | | (4.26 | ) | | | (4.57 | ) |
Total from investment operations | | | 1.48 | | | | (3.92 | ) | | | (1.81 | ) | | | (5.00 | ) | | | (5.21 | ) |
Net asset value, end of period | | $ | 63.45 | | | $ | 61.97 | | | $ | 65.89 | | | $ | 67.70 | | | $ | 72.70 | |
|
Total Return | | | 2.39 | % | | | (5.95 | %) | | | (2.67 | %) | | | (6.90 | %) | | | (6.67 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 13,479 | | | $ | 4,675 | | | $ | 8,755 | | | $ | 14,855 | | | $ | 2,513 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.09 | % | | | 0.63 | % | | | (0.18 | %) | | | (1.06 | %) | | | (0.84 | %) |
Total expensesc | | | 1.64 | % | | | 1.61 | % | | | 1.52 | % | | | 1.52 | % | | | 1.50 | % |
Net expensesd | | | 1.62 | % | | | 1.59 | % | | | 1.52 | % | | | 1.52 | % | | | 1.50 | % |
Portfolio turnover rate | | | 254 | % | | | — | | | | 41 | % | | | 480 | % | | | 1,722 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the years presented through March 31, 2017 have been restated to reflect a 1:4 share split effective November 4, 2016. |
162 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVE: Seeks to provide security of principal, high current income, and liquidity.
For the year ended March 31, 2020, U.S. Government Money Market Fund returned 0.99%.
The fiscal year started with the Federal Funds target rate between 2.25% and 2.50%. Starting in July 2019, the U.S. Federal Reserve (“Fed”) orchestrated three successive interest rate cuts totaling 0.75%, which reduced the target rate to 1.50% to 1.75% by the end of October 2019. The three successive rate cuts were described as a mid-cycle adjustment to help keep the economy expanding. In March of 2020, the Fed made two intra-meeting cuts, which dropped the target rate to 0.00% to 0.25% due to the anticipation of a slowdown cause by the Coronavirus. Due to the drop in interest rates, the Fund’s yield declined throughout the period.
The U.S. economy had remained strong throughout 2019 and early 2020, although some signs of weakness began to appear in the manufacturing sector. Personal consumption remained strong. The full impacts of the Coronavirus have yet to appear in the economic data. However, there was a record increase in jobless claims once several states put in shelter-in-place orders. It is unclear at this time how much of the economic impact will be temporary or permanent. Interest rates will likely remain very low for quite some time until more information about the longer-term impacts from the Coronavirus is known.
Performance displayed represents past performance, which is no guarantee of future results.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
FADN – Federal Agency Discount Note
FAN – Federal Agency Note
Inception Date: June 18, 2012 |
The Fund invests principally in money market instruments issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities and enters into repurchase agreements fully collateralized by U.S. government securities.
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | Since
Inception
(06/18/12) |
U.S. Government Money Market Fund | 0.99% | 0.46% | 0.30% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. |
| | THE RYDEX FUNDS ANNUAL REPORT | 163 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
U.S. GOVERNMENT MONEY MARKET FUND | |
| | Face
Amount | | | Value | |
FEDERAL AGENCY NOTES†† - 51.9% |
Farmer Mac |
0.24% (Fed Funds Effective Rate + 0.15%, Rate Floor: 0.00%) due 09/23/201 | | $ | 20,000,000 | | | $ | 20,000,000 | |
0.23% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 01/04/211 | | | 18,000,000 | | | | 18,000,000 | |
0.23% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 07/01/201 | | | 17,300,000 | | | | 17,300,000 | |
1.65% (3 Month USD LIBOR - 0.16%, Rate Floor: 0.00%) due 10/23/201 | | | 10,000,000 | | | | 10,001,105 | |
Federal Home Loan Bank |
0.10% (U.S. Secured Overnight Financing Rate + 0.09%, Rate Floor: 0.00%) due 09/11/201 | | | 18,200,000 | | | | 18,200,000 | |
0.04% (U.S. Secured Overnight Financing Rate + 0.03%, Rate Floor: 0.00%) due 09/04/201 | | | 12,000,000 | | | | 11,996,896 | |
0.15% (U.S. Secured Overnight Financing Rate + 0.14%, Rate Floor: 0.00%) due 03/10/211 | | | 7,500,000 | | | | 7,500,000 | |
1.61% (3 Month USD LIBOR - 0.24%, Rate Floor: 0.00%) due 04/13/201 | | | 5,990,000 | | | | 5,989,763 | |
0.04% (U.S. Secured Overnight Financing Rate + 0.03%, Rate Floor: 0.00%) due 08/05/201 | | | 5,000,000 | | | | 4,999,122 | |
2.63% due 05/28/20 | | | 2,530,000 | | | | 2,532,963 | |
0.76% (1 Month USD LIBOR - 0.04%, Rate Floor: 0.00%) due 04/17/201 | | | 2,400,000 | | | | 2,399,907 | |
0.13% (U.S. Secured Overnight Financing Rate + 0.12%, Rate Floor: 0.00%) due 10/07/201 | | | 2,000,000 | | | | 1,999,754 | |
2.32% due 04/13/20 | | | 1,950,000 | | | | 1,950,132 | |
0.14% (U.S. Secured Overnight Financing Rate + 0.13%, Rate Floor: 0.00%) due 10/16/201 | | | 1,400,000 | | | | 1,399,997 | |
0.80% (1 Month USD LIBOR - 0.06%, Rate Floor: 0.00%) due 06/10/201 | | | 1,000,000 | | | | 1,000,079 | |
1.70% due 05/15/20 | | | 1,000,000 | | | | 999,726 | |
1.75% due 06/12/20 | | | 790,000 | | | | 790,070 | |
1.65% due 07/03/20 | | | 550,000 | | | | 551,516 | |
1.38% due 06/12/20 | | | 430,000 | | | | 429,579 | |
3.38% due 06/12/20 | | | 400,000 | | | | 401,022 | |
Fannie Mae |
0.05% (U.S. Secured Overnight Financing Rate + 0.04%, Rate Floor: 0.00%) due 06/05/201 | | | 20,000,000 | | | | 20,000,000 | |
0.09% (U.S. Secured Overnight Financing Rate + 0.08%, Rate Floor: 0.00%) due 10/30/201 | | | 17,500,000 | | | | 17,500,465 | |
0.09% (U.S. Secured Overnight Financing Rate + 0.08%, Rate Floor: 0.00%) due 09/16/201 | | | 8,000,000 | | | | 8,000,000 | |
1.38% due 02/26/21 | | | 117,000 | | | | 117,855 | |
Federal Farm Credit Bank |
0.32% (U.S. Prime Rate - 2.93%, Rate Floor: 0.00%) due 09/24/201 | | | 13,000,000 | | | | 13,007,052 | |
2.70% due 02/23/21 | | | 750,000 | | | | 764,263 | |
1.55% due 04/13/20 | | | 500,000 | | | | 499,975 | |
1.42% due 05/13/20 | | | 300,000 | | | | 299,836 | |
1.75% due 06/10/20 | | | 275,000 | | | | 275,619 | |
Freddie Mac |
0.05% (U.S. Secured Overnight Financing Rate + 0.04%, Rate Floor: 0.00%) due 04/03/201 | | | 12,430,000 | | | | 12,429,986 | |
1.38% due 05/01/20 | | | 1,327,000 | | | | 1,326,388 | |
1.55% due 07/30/20 | | | 250,000 | | | | 250,812 | |
Total Federal Agency Notes | | | | |
(Cost $202,913,882) | | | | | | | 202,913,882 | |
| | | | | | | | | |
FEDERAL AGENCY DISCOUNT NOTES†† - 30.6% |
Federal Home Loan Bank |
0.01% due 04/16/202 | | | 30,300,000 | | | | 30,299,874 | |
0.05% due 04/01/202 | | | 22,623,000 | | | | 22,623,000 | |
0.00% due 04/08/202 | | | 16,000,000 | | | | 15,999,985 | |
0.02% due 05/04/202 | | | 10,800,000 | | | | 10,799,802 | |
0.60% due 04/29/202 | | | 2,300,000 | | | | 2,298,927 | |
0.25% due 04/01/202 | | | 2,200,000 | | | | 2,200,000 | |
0.15% due 05/01/202 | | | 2,000,000 | | | | 1,999,750 | |
0.02% due 04/06/202 | | | 1,985,000 | | | | 1,984,989 | |
0.02% due 04/01/202 | | | 1,200,000 | | | | 1,200,000 | |
0.01% due 04/01/202 | | | 1,050,000 | | | | 1,050,000 | |
0.00% due 04/01/202 | | | 1,000,000 | | | | 1,000,000 | |
0.08% due 04/06/202 | | | 1,000,000 | | | | 999,995 | |
0.01% due 04/09/202 | | | 800,000 | | | | 799,998 | |
0.00% due 04/08/202 | | | 700,000 | | | | 699,999 | |
0.03% due 05/06/202 | | | 400,000 | | | | 399,988 | |
0.15% due 05/06/202 | | | 300,000 | | | | 299,956 | |
0.10% due 04/01/202 | | | 100,000 | | | | 100,000 | |
Farmer Mac |
0.01% due 04/01/202 | | | 24,000,000 | | | | 24,000,000 | |
Federal Farm Credit Bank |
0.58% due 05/19/202 | | | 500,000 | | | | 499,613 | |
Total Federal Agency Discount Notes | | | | |
(Cost $119,255,876) | | | | | | | 119,255,876 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,3 - 8.0% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | | 22,657,743 | | | | 22,657,743 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 8,714,516 | | | | 8,714,516 | |
Total Repurchase Agreements | | | | |
(Cost $31,372,259) | | | | | | | 31,372,259 | |
| | | | | | | | | |
Total Investments - 90.5% | | | | |
(Cost $353,542,017) | | $ | 353,542,017 | |
Other Assets & Liabilities, net - 9.5% | | | 37,249,440 | |
Total Net Assets - 100.0% | | $ | 390,791,457 | |
164 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
U.S. GOVERNMENT MONEY MARKET FUND | |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Repurchase Agreements — See Note 6. |
| | LIBOR— London Interbank Offered Rate |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Federal Agency Notes | | $ | — | | | $ | 202,913,882 | | | $ | — | | | $ | 202,913,882 | |
Federal Agency Discount Notes | | | — | | | | 119,255,876 | | | | — | | | | 119,255,876 | |
Repurchase Agreements | | | — | | | | 31,372,259 | | | | — | | | | 31,372,259 | |
Total Assets | | $ | — | | | $ | 353,542,017 | | | $ | — | | | $ | 353,542,017 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 165 |
U.S. GOVERNMENT MONEY MARKET FUND | |
| STATEMENT OF ASSETS AND LIABILITIES |
| March 31, 2020 |
Assets: |
Investments, at value (cost $322,169,758) | | $ | 322,169,758 | |
Repurchase agreements, at value (cost $31,372,259) | | | 31,372,259 | |
Cash | | | 25,515,732 | |
Receivables: |
Fund shares sold | | | 25,907,922 | |
Interest | | | 353,315 | |
Total assets | | | 405,318,986 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 13,888,697 | |
Management fees | | | 72,102 | |
Transfer agent and administrative fees | | | 47,733 | |
Portfolio accounting fees | | | 15,973 | |
Trustees’ fees* | | | 7,869 | |
Distributions to shareholders | | | 73 | |
Miscellaneous | | | 495,082 | |
Total liabilities | | | 14,527,529 | |
Commitments and contingent liabilities (Note 12) | | | — | |
Net assets | | $ | 390,791,457 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 390,640,565 | |
Total distributable earnings (loss) | | | 150,892 | |
Net assets | | $ | 390,791,457 | |
Capital shares outstanding | | | 390,619,678 | |
Net asset value per share | | $ | 1.00 | |
| STATEMENT OF OPERATIONS |
| Year Ended March 31, 2020 |
Investment Income: |
Interest | | $ | 8,286,794 | |
Total investment income | | | 8,286,794 | |
| | | | | |
Expenses: |
Management fees | | | 2,023,129 | |
Transfer agent and administrative fees | | | 826,070 | |
Registration fees | | | 382,570 | |
Portfolio accounting fees | | | 365,751 | |
Professional fees | | | 211,756 | |
Trustees’ fees* | | | 101,665 | |
Custodian fees | | | 57,874 | |
Miscellaneous | | | 339,315 | |
Total expenses | | | 4,308,130 | |
Less: |
Expenses reimbursed by Adviser | | | (39,375 | ) |
Expenses waived by Adviser | | | (85,748 | ) |
Total waived/reimbursed expenses | | | (125,123 | ) |
Net expenses | | | 4,183,007 | |
Net investment income | | | 4,103,787 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 55,390 | |
Net realized gain | | | 55,390 | |
Net increase in net assets resulting from operations | | $ | 4,159,177 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
166 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
U.S. GOVERNMENT MONEY MARKET FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 4,103,787 | | | $ | 5,349,868 | |
Net realized gain on investments | | | 55,390 | | | | 23,456 | |
Net change in unrealized appreciation (depreciation) on investments | | | — | | | | — | |
Net increase in net assets resulting from operations | | | 4,159,177 | | | | 5,373,324 | |
| | | | | | | | | |
Distributions to shareholders | | | (4,103,774 | ) | | | (5,349,868 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | 5,994,438,512 | | | | 6,239,411,232 | |
Distributions reinvested | | | 4,076,467 | | | | 5,296,314 | |
Cost of shares redeemed | | | (6,020,978,588 | ) | | | (6,376,058,992 | ) |
Net decrease from capital share transactions | | | (22,463,609 | ) | | | (131,351,446 | ) |
Net decrease in net assets | | | (22,408,206 | ) | | | (131,327,990 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 413,199,663 | | | | 544,527,653 | |
End of year | | $ | 390,791,457 | | | $ | 413,199,663 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | 5,994,438,513 | | | | 6,239,411,231 | |
Shares issued from reinvestment of distributions | | | 4,076,837 | | | | 5,293,026 | |
Shares redeemed | | | (6,020,978,588 | ) | | | (6,376,058,978 | ) |
Net decrease in shares | | | (22,463,238 | ) | | | (131,354,721 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 167 |
U.S. GOVERNMENT MONEY MARKET FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .01 | | | | .01 | | | | — | b | | | — | b | | | — | b |
Net gain (loss) on investments (realized and unrealized) | | | — | b | | | — | b | | | — | b | | | — | b | | | — | b |
Total from investment operations | | | .01 | | | | .01 | | | | — | b | | | — | b | | | — | b |
Less distributions from: |
Net investment income | | | (.01 | ) | | | (.01 | ) | | | (— | )b | | | (— | )b | | | (— | )b |
Net realized gains | | | — | | | | — | | | | — | | | | (— | )b | | | — | |
Total distributions | | | (.01 | ) | | | (.01 | ) | | | (— | )b | | | (— | )b | | | (— | )b |
Net asset value, end of period | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | | | $ | 1.00 | |
|
Total Return | | | 0.99 | % | | | 1.10 | % | | | 0.22 | % | | | 0.01 | % | | | 0.00 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 390,791 | | | $ | 413,200 | | | $ | 544,528 | | | $ | 627,514 | | | $ | 643,872 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.01 | % | | | 1.10 | % | | | 0.22 | % | | | 0.00 | %c | | | 0.00 | %c |
Total expenses | | | 1.06 | % | | | 1.05 | % | | | 0.96 | % | | | 0.95 | % | | | 0.91 | % |
Net expensesd | | | 1.03 | % | | | 1.05 | % | | | 0.94 | % | | | 0.47 | % | | | 0.22 | % |
Portfolio turnover rate | | | — | | | | — | | | | — | | | | — | | | | — | |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Less than $0.01 per share. |
c | Less than 0.01%. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
168 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of seven separate classes of shares: Investor Class shares, A-Class shares, C-Class shares, H-Class shares, P-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. C-Class shares of each Fund automatically convert to A-Class shares of the same Fund on or about the 10th day of the month following the 10-year anniversary of the purchase of the C-Class shares. This conversion will be executed without any sales charge, fee or other charge. After the conversion is completed, the shares will be subject to all features and expenses of A-Class shares. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares require a minimum initial investment of $2 million and a minimum account balance of $1 million. At March 31, 2020, the Trust consisted of fifty-two funds.
This report covers the following funds (collectively, the “Funds”):
Fund Name | | Investment
Company Type | |
Nova Fund | | | Non-diversified | |
S&P 500® Fund | | | Non-diversified | |
Inverse S&P 500® Strategy Fund | | | Non-diversified | |
Monthly Rebalance NASDAQ -100® 2x Strategy Fund | | | Non-diversified | |
Inverse NASDAQ-100® Strategy Fund | | | Non-diversified | |
Mid-Cap 1.5x Strategy Fund | | | Non-diversified | |
Inverse Mid-Cap Strategy Fund | | | Non-diversified | |
Russell 2000® 1.5x Strategy Fund | | | Non-diversified | |
Russell 2000® Fund | | | Non-diversified | |
Inverse Russell 2000® Strategy Fund | | | Non-diversified | |
Dow Jones Industrial Average® Fund | | | Non-diversified | |
Government Long Bond 1.2x Strategy Fund | | | Diversified | |
Inverse Government Long Bond Strategy Fund | | | Diversified | |
High Yield Strategy Fund | | | Non-diversified | |
Inverse High Yield Strategy Fund | | | Non-diversified | |
U.S. Government Money Market Fund | | | Diversified | |
At March 31, 2020, Investor Class, A-Class, C-Class, H-Class and Money Market Class shares have been issued by the Funds.
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
| | THE RYDEX FUNDS ANNUAL REPORT | 169 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The NAV of each Class of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, attributable to the Class by the number of outstanding shares of the Class.
The Trust calculates a NAV twice each business day; at 10:45 a.m. and at the close of the New York Stock Exchange (“NYSE”), usually 4:00 p.m. for the Russell 2000® Fund and the S&P 500® Fund. All other Funds in this report will price at the afternoon NAV. The NAV is calculated using the current market value of each Fund’s total assets as of the respective time of calculation. These financial statements are based on the March 31, 2020, afternoon NAV.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds are valued at the last quoted sale price.
The U.S. Government Money Market Fund values debt securities at amortized cost pursuant to Rule 2a-7 of the 1940 Act, which approximates market value.
With the exception of the U.S. Government Money Market Fund, U.S. government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The values of swap agreements entered into by a fund are accounted for using the unrealized appreciation or depreciation on the agreements that are determined by marking the agreements to the last quoted value of the index or other underlying position that the swaps pertain to at the close of the NYSE.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as
170 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis. In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Short Sales
When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales.
Fees, if any, paid to brokers to borrow securities in connection with short sales are recorded as interest expense. In addition, the Fund must pay out the dividend rate of the equity or coupon rate of the obligation to the lender and record this as an expense. Short dividend or interest expense is a cost associated with the investment objective of short sales transactions, rather than an operational cost associated with the day-to-day management of any mutual fund. The Fund may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
(d) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(e) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Upfront payments received or made by a Fund on credit default swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
(f) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of March 31, 2020, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(g) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued
| | THE RYDEX FUNDS ANNUAL REPORT | 171 |
NOTES TO FINANCIAL STATEMENTS (continued) |
on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(h) Distributions
Dividends from net investment income are declared daily in the Government Long Bond 1.2x Strategy Fund and the U.S. Government Money Market Fund. Dividends are reinvested in additional shares unless shareholders request payment in cash. Distributions of net investment income in the remaining Funds and distributions of net realized gains, if any, in all Funds are declared at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(i) Class Allocations
Interest and dividend income, most expenses, all realized gains and losses, and all unrealized appreciation and depreciation are allocated to the classes based upon the value of the outstanding shares in each Class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust based on the respective net assets of each Fund included in the Trust.
(j) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.08% at March 31, 2020.
(k) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Financial Instruments and Derivatives
As part of their investment strategy, the Funds utilize short sales and a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized in the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Short Sales
A short sale is a transaction in which a Fund sells a security it does not own. If the security sold short decreases in price between the time the Fund sells the security and closes its short position, the Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, the Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
Derivatives
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase
172 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Long | | | Short | |
Nova Fund | Index exposure, Leverage, Liquidity | | $ | 47,098,868 | | | $ | — | |
S&P 500® Fund | Index exposure, Liquidity | | | 9,643,594 | | | | — | |
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | | | 52,367 | | | | 2,542,440 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | 38,804,085 | | | | — | |
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | | | 70,631 | | | | 635,938 | |
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | | | 9,952,355 | | | | 48,924 | |
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | | | — | | | | — | * |
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | | | 2,900,515 | | | | — | |
Russell 2000® Fund | Index exposure, Liquidity | | | 1,982,292 | | | | 311,417 | |
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | | | 31,606 | | | | 664,605 | |
Dow Jones Industrial Average® Fund | Index exposure, Liquidity | | | 2,554,835 | | | | — | |
Government Long Bond 1.2x Strategy Fund | Duration, Index exposure, Leverage, Liquidity | | | 74,033,154 | | | | — | |
Inverse Government Long Bond Strategy Fund | Duration, Index exposure, Liquidity | | | — | | | | 25,572,063 | |
High Yield Strategy Fund | Duration, Index exposure, Liquidity | | | 69,021,097 | | | | — | |
Inverse High Yield Strategy Fund | Duration, Index exposure, Liquidity | | | — | | | | 4,418,900 | |
* | Futures contracts were outstanding for 1 day during the year ended March 31, 2020. The daily average outstanding notional amount of equity futures contracts during the year was $145,190. |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing over-the-counter (“OTC”) swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Total return swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as an index) for a fixed or variable interest rate. Total return swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued,
| | THE RYDEX FUNDS ANNUAL REPORT | 173 |
NOTES TO FINANCIAL STATEMENTS (continued) |
financing charges and/or interest associated with the swap agreement. When utilizing a total return swap, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in value.
The following table represents the Funds’ use and volume of total return swaps on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Long | | | Short | |
Nova Fund | Index exposure, Leverage, Liquidity | | $ | 179,610,101 | | | $ | — | |
S&P 500® Fund | Index exposure, Liquidity | | | 14,653,490 | | | | — | |
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | | | — | | | | 60,076,116 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | 171,145,772 | | | | — | |
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | | | — | | | | 14,746,524 | |
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | | | 27,364,052 | | | | — | |
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | | | — | | | | 833,354 | |
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | | | 23,862,719 | | | | — | |
Russell 2000® Fund | Index exposure, Liquidity | | | 22,993,042 | | | | — | |
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | | | — | | | | 7,446,169 | |
Dow Jones Industrial Average® Fund | Index exposure, Liquidity | | | 5,977,640 | | | | — | |
High Yield Strategy Fund | Duration, Index exposure, Liquidity | | | 9,948,838 | | | | — | |
Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. A fund enters into credit default swaps as a “seller” or “buyer” of protection primarily to gain or reduce exposure to the investment grade and/or high yield bond market. A seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. The buyer in a credit default swap is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If a credit event occurs, as defined under the terms of the swap agreement, the seller will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The notional amount reflects the maximum potential amount the seller of credit protection could be required to pay to the buyer if a credit event occurs. The seller of protection receives periodic premium payments from the buyer and may also receive or pay an upfront premium adjustment to the stated periodic payments. In the event a credit default occurs on a credit default swap referencing an index, a factor adjustment will take place and the buyer of protection will receive a payment reflecting the par less the default recovery rate of the defaulted index component based on its weighting in the index. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the fund selling the credit protection. For a fund utilizing centrally cleared credit default swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. For OTC credit default swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which a fund is selling credit protection, the default of a third party issuer.
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The following table represents the Funds’ use and volume of credit default swaps on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Protection Purchased | | | Protection Sold | |
High Yield Strategy Fund | Duration, Index exposure, Liquidity | | $ | — | | | $ | 69,877,292 | |
Inverse High Yield Strategy Fund | Duration, Index exposure, Liquidity | | | 5,043,417 | | | | — | |
174 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of March 31, 2020:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Interest rate contracts | Variation margin on futures contracts | Variation margin on futures contracts |
Equity/Credit contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
Credit contracts | Variation margin on credit default swap agreements | Variation margin on credit default swap agreements |
| | Unamortized upfront premiums paid on credit default swap agreements | Unamortized upfront premiums received on credit default swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at March 31 2020:
Asset Derivative Investments Value |
Fund | | Futures
Equity
Risk* | | | Swaps
Equity
Risk | | | Futures
Interest
Rate Risk* | | | Swaps
Credit
Risk* | | | Total
Value at
March 31, 2020 | |
Nova Fund | | $ | 5,787 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5,787 | |
S&P 500® Fund | | | 794,086 | | | | — | | | | — | | | | — | | | | 794,086 | |
Inverse S&P 500® Strategy Fund | | | — | | | | 1,368,951 | | | | — | | | | — | | | | 1,368,951 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 345,252 | | | | — | | | | — | | | | — | | | | 345,252 | |
Inverse NASDAQ-100® Strategy Fund | | | — | | | | 544,555 | | | | — | | | | — | | | | 544,555 | |
Mid-Cap 1.5x Strategy Fund | | | 104,598 | | | | 170,910 | | | | — | | | | — | | | | 275,508 | |
Inverse Mid-Cap Strategy Fund | | | — | | | | 21,114 | | | | — | | | | — | | | | 21,114 | |
Russell 2000® 1.5x Strategy Fund | | | 80,238 | | | | 122,150 | | | | — | | | | — | | | | 202,388 | |
Russell 2000® Fund | | | 164,076 | | | | 436,135 | | | | — | | | | — | | | | 600,211 | |
Inverse Russell 2000® Strategy Fund | | | — | | | | 444,289 | | | | — | | | | — | | | | 444,289 | |
Dow Jones Industrial Average® Fund | | | 177,057 | | | | — | | | | — | | | | — | | | | 177,057 | |
Government Long Bond 1.2x Strategy Fund | | | — | | | | — | | | | 7,474,465 | | | | — | | | | 7,474,465 | |
High Yield Strategy Fund | | | — | | | | — | | | | 301,972 | | | | 96,745 | | | | 398,717 | |
Inverse High Yield Strategy Fund | | | — | | | | — | | | | — | | | | 155,495 | | | | 155,495 | |
Liability Derivative Investments Value |
Fund | | Futures
Equity
Risk* | | | Swaps
Equity
Risk | | | Futures
Interest
Rate Risk* | | | Swaps
Credit
Risk* | | | Total
Value at
March 31, 2020 | |
Nova Fund | | $ | — | | | $ | 1,252,324 | | | $ | — | | | $ | — | | | $ | 1,252,324 | |
S&P 500® Fund | | | — | | | | 639,207 | | | | — | | | | — | | | | 639,207 | |
Inverse S&P 500® Strategy Fund | | | 879,553 | | | | — | | | | — | | | | — | | | | 879,553 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | — | | | | 332,358 | | | | — | | | | — | | | | 332,358 | |
Inverse NASDAQ-100® Strategy Fund | | | 357,235 | | | | — | | | | — | | | | — | | | | 357,235 | |
Mid-Cap 1.5x Strategy Fund | | | — | | | | 66,137 | | | | — | | | | — | | | | 66,137 | |
Russell 2000® 1.5x Strategy Fund | | | — | | | | 19,495 | | | | — | | | | — | | | | 19,495 | |
Russell 2000® Fund | | | — | | | | 28,407 | | | | — | | | | — | | | | 28,407 | |
Dow Jones Industrial Average® Fund | | | — | | | | 267,315 | | | | — | | | | — | | | | 267,315 | |
Inverse Government Long Bond Strategy Fund | | | — | | | | — | | | | 1,081,548 | | | | — | | | | 1,081,548 | |
High Yield Strategy Fund | | | — | | | | — | | | | — | | | | 481,567 | | | | 481,567 | |
Inverse High Yield Strategy Fund | | | — | | | | — | | | | 35,612 | | | | — | | | | 35,612 | |
* | Includes cumulative appreciation (depreciation) of futures contracts and centrally cleared swaps as reported on the Schedules of Investments. Variation margin is reported within the Statements of Assets and Liabilities. |
| | THE RYDEX FUNDS ANNUAL REPORT | 175 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended March 31, 2020:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Interest Rate contracts | Net realized gain (loss) on futures contracts |
| | Net change in unrealized appreciation (depreciation) on futures contracts |
Equity/Credit contracts | Net realized gain (loss) on swap agreements |
| | Net change in unrealized appreciation (depreciation) on swap agreements |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended March 31, 2020:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations |
Fund | | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Futures
Interest
Rate Risk | | | Swaps
Credit
Risk | | | Total | |
Nova Fund | | $ | 684,381 | | | $ | (17,155,385 | ) | | $ | — | | | $ | — | | | $ | (16,471,004 | ) |
S&P 500® Fund | | | 2,570,395 | | | | 8,449,493 | | | | — | | | | — | | | | 11,019,888 | |
Inverse S&P 500® Strategy Fund | | | (1,057,030 | ) | | | (3,203,897 | ) | | | — | | | | — | | | | (4,260,927 | ) |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 3,029,992 | | | | (4,854,663 | ) | | | — | | | | — | | | | (1,824,671 | ) |
Inverse NASDAQ-100® Strategy Fund | | | 429,332 | | | | (4,192,889 | ) | | | — | | | | — | | | | (3,763,557 | ) |
Mid-Cap 1.5x Strategy Fund | | | 338,010 | | | | (1,584,528 | ) | | | — | | | | — | | | | (1,246,518 | ) |
Inverse Mid-Cap Strategy Fund | | | (1,894 | ) | | | (45,075 | ) | | | — | | | | — | | | | (46,969 | ) |
Russell 2000® 1.5x Strategy Fund | | | 128,719 | | | | (366,992 | ) | | | — | | | | — | | | | (238,273 | ) |
Russell 2000® Fund | | | (1,873,212 | ) | | | (6,401,286 | ) | | | — | | | | — | | | | (8,274,498 | ) |
Inverse Russell 2000® Strategy Fund | | | (253,463 | ) | | | (1,589,611 | ) | | | — | | | | — | | | | (1,843,074 | ) |
Dow Jones Industrial Average® Fund | | | (279,514 | ) | | | 25,921 | | | | — | | | | — | | | | (253,593 | ) |
Government Long Bond 1.2x Strategy Fund | | | — | | | | — | | | | 13,924,630 | | | | — | | | | 13,924,630 | |
Inverse Government Long Bond Strategy Fund | | | — | | | | — | | | | (5,344,875 | ) | | | — | | | | (5,344,875 | ) |
High Yield Strategy Fund | | | — | | | | — | | | | 3,976,983 | | | | (2,538,854 | ) | | | 1,438,129 | |
Inverse High Yield Strategy Fund | | | — | | | | — | | | | (533,698 | ) | | | 995,167 | | | | 461,469 | |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations |
Fund | | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Futures
Interest
Rate Risk | | | Swaps
Credit
Risk | | | Total | |
Nova Fund | | $ | (2,973,895 | ) | | $ | (2,583,813 | ) | | $ | — | | | $ | — | | | $ | (5,557,708 | ) |
S&P 500® Fund | | | 793,965 | | | | (828,327 | ) | | | — | | | | — | | | | (34,362 | ) |
Inverse S&P 500® Strategy Fund | | | (862,410 | ) | | | 1,957,709 | | | | — | | | | — | | | | 1,095,299 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | (489,712 | ) | | | (1,536,335 | ) | | | — | | | | — | | | | (2,026,047 | ) |
Inverse NASDAQ-100® Strategy Fund | | | (343,318 | ) | | | 615,912 | | | | — | | | | — | | | | 272,594 | |
Mid-Cap 1.5x Strategy Fund | | | 68,475 | | | | (206,604 | ) | | | — | | | | — | | | | (138,129 | ) |
Inverse Mid-Cap Strategy Fund | | | — | | | | 31,158 | | | | — | | | | — | | | | 31,158 | |
Russell 2000® 1.5x Strategy Fund | | | 80,238 | | | | (7,443 | ) | | | — | | | | — | | | | 72,795 | |
Russell 2000® Fund | | | 162,079 | | | | 250,797 | | | | — | | | | — | | | | 412,876 | |
Inverse Russell 2000® Strategy Fund | | | 13,457 | | | | 555,378 | | | | — | | | | — | | | | 568,835 | |
Dow Jones Industrial Average® Fund | | | 177,355 | | | | (400,302 | ) | | | — | | | | — | | | | (222,947 | ) |
Government Long Bond 1.2x Strategy Fund | | | — | | | | — | | | | 5,019,267 | | | | — | | | | 5,019,267 | |
Inverse Government Long Bond Strategy Fund | | | — | | | | — | | | | (570,556 | ) | | | — | | | | (570,556 | ) |
High Yield Strategy Fund | | | — | | | | — | | | | (587,391 | ) | | | (1,085,704 | ) | | | (1,673,095 | ) |
Inverse High Yield Strategy Fund | | | — | | | | — | | | | 18,663 | | | | 183,741 | | | | 202,404 | |
In conjunction with short sales and the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
176 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
| | THE RYDEX FUNDS ANNUAL REPORT | 177 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
| | | | | | | | | | | | | | | | Gross Amounts Not Offset
in the Statements of
Assets and Liabilities | | | | | |
Fund | Instrument | | Gross
Amounts of
Recognized
Assets1 | | | Gross
Amounts
Offset in the
Statements
of Assets and
Liabilities | | | Net Amount
of Assets
Presented on
the Statements
of Assets and
Liabilities | | | Financial
Instruments | | | Cash
Collateral
Received | | | Net Amount | |
Inverse S&P 500® Strategy Fund | Swap equity contracts | | $ | 1,368,951 | | | $ | — | | | $ | 1,368,951 | | | $ | — | | | $ | — | | | $ | 1,368,951 | |
Inverse NASDAQ-100® Strategy Fund | Swap equity contracts | | | 544,555 | | | | — | | | | 544,555 | | | | — | | | | — | | | | 544,555 | |
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | | | 170,910 | | | | — | | | | 170,910 | | | | — | | | | — | | | | 170,910 | |
Inverse Mid-Cap Strategy Fund | Swap equity contracts | | | 21,114 | | | | — | | | | 21,114 | | | | — | | | | — | | | | 21,114 | |
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | | | 122,150 | | | | — | | | | 122,150 | | | | — | | | | — | | | | 122,150 | |
Russell 2000® Fund | Swap equity contracts | | | 436,135 | | | | — | | | | 436,135 | | | | — | | | | — | | | | 436,135 | |
Inverse Russell 2000® Strategy Fund | Swap equity contracts | | | 444,289 | | | | — | | | | 444,289 | | | | — | | | | — | | | | 444,289 | |
High Yield Strategy Fund | Swap credit contracts | | | 96,745 | | | | — | | | | 96,745 | | | | — | | | | — | | | | 96,745 | |
| | | | | | | | | | | | | | | | Gross Amounts Not Offset
in the Statements of
Assets and Liabilities | | | | | |
Fund | Instrument | | Gross
Amounts of
Recognized
Liabilities1 | | | Gross
Amounts
Offset in the
Statements
of Assets and
Liabilities | | | Net Amount
of Liabilities
Presented on
the Statements
of Assets and
Liabilities | | | Financial
Instruments | | | Cash
Collateral
Pledged | | | Net Amount | |
Nova Fund | Swap equity contracts | | $ | 1,252,324 | | | $ | — | | | $ | 1,252,324 | | | $ | (666,657 | ) | | $ | (585,667 | ) | | $ | — | |
S&P 500® Fund | Swap equity contracts | | | 639,207 | | | | — | | | | 639,207 | | | | (633,460 | ) | | | (5,747 | ) | | | — | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | Swap equity contracts | | | 332,358 | | | | — | | | | 332,358 | | | | (179,458 | ) | | | — | | | | 152,900 | |
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | | | 66,137 | | | | — | | | | 66,137 | | | | (66,137 | ) | | | — | | | | — | |
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | | | 19,495 | | | | — | | | | 19,495 | | | | (19,495 | ) | | | — | | | | — | |
Russell 2000® Fund | Swap equity contracts | | | 28,407 | | | | — | | | | 28,407 | | | | (28,407 | ) | | | — | | | | — | |
Dow Jones Industrial Average® Fund | Swap equity contracts | | | 267,315 | | | | — | | | | 267,315 | | | | (83,026 | ) | | | — | | | | 184,289 | |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
178 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of March 31, 2020.
Fund | Counterparty | Asset Type | | Cash Pledged | | | Cash Received | |
Nova Fund | Barclays Bank plc | Total return swap agreements | | $ | 9,773,076 | | | $ | — | |
S&P 500® Fund | Barclays Bank plc | Total return swap agreements | | | 320,002 | | | | — | |
| Goldman Sachs International | Futures contracts | | | 1,080,000 | | | | — | |
S&P 500® Fund Total | | | | | 1,400,002 | | | | — | |
Inverse S&P 500® Strategy Fund | Barclays Bank plc | Total return swap agreements | | | 920,000 | | | | — | |
| Goldman Sachs International | Futures contracts | | | 909,680 | | | | — | |
Inverse S&P 500® Strategy Fund Total | | | | | 1,829,680 | | | | — | |
Inverse NASDAQ-100® Strategy Fund | Barclays Bank plc | Total return swap agreements | | | 1,910,000 | | | | — | |
Mid-Cap 1.5x Strategy Fund | Barclays Bank plc | Total return swap agreements | | | 181,070 | | | | — | |
| Goldman Sachs International | Futures contracts | | | 225,013 | | | | — | |
Mid-Cap 1.5x Strategy Fund Total | | | | | 406,083 | | | | — | |
Inverse Mid-Cap Strategy Fund | Goldman Sachs International | Futures contracts | | | 17,000 | | | | — | |
Russell 2000® 1.5x Strategy Fund | Barclays Bank plc | Total return swap agreements | | | 164,734 | | | | — | |
| Goldman Sachs International | Futures contracts | | | 98,222 | | | | — | |
Russell 2000® 1.5x Strategy Fund Total | | | | | 262,956 | | | | — | |
Russell 2000® Fund | Barclays Bank plc | Total return swap agreements | | | 628,146 | | | | — | |
| Goldman Sachs International | Futures contracts | | | 166,634 | | | | — | |
Russell 2000® Fund Total | | | | | 794,780 | | | | — | |
Dow Jones Industrial Average® Fund | Barclays Bank plc | Total return swap agreements | | | 1,160,088 | | | | 337,086 | |
| Goldman Sachs International | Futures contracts | | | 191,307 | | | | — | |
Dow Jones Industrial Average® Fund Total | | | | | 1,351,395 | | | | 337,086 | |
Government Long Bond 1.2x Strategy Fund | Goldman Sachs International | Futures contracts | | | 2,497,955 | | | | — | |
Inverse Government Long Bond Strategy Fund | Goldman Sachs International | Futures contracts | | | 347,643 | | | | — | |
High Yield Strategy Fund | Barclays Bank plc | Credit default swap agreements | | | 1,387,007 | | | | — | |
| Goldman Sachs International | Credit default swap agreements | | | 923,798 | | | | — | |
High Yield Strategy Fund Total | | | | | 2,310,805 | | | | — | |
Inverse High Yield Strategy Fund | Barclays Bank plc | Credit default swap agreements | | | 118,825 | | | | — | |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
| | THE RYDEX FUNDS ANNUAL REPORT | 179 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | | Management Fees (as
a % of Net Assets) | |
Nova Fund | | | 0.75 | % |
S&P 500® Fund | | | 0.75 | % |
Inverse S&P 500® Strategy Fund | | | 0.90 | % |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 0.90 | % |
Inverse NASDAQ-100® Strategy Fund | | | 0.90 | % |
Mid-Cap 1.5x Strategy Fund | | | 0.90 | % |
Inverse Mid-Cap Strategy Fund | | | 0.90 | % |
Russell 2000® 1.5x Strategy Fund | | | 0.90 | % |
Russell 2000® Fund | | | 0.75 | % |
Inverse Russell 2000® Strategy Fund | | | 0.90 | % |
Dow Jones Industrial Average® Fund | | | 0.75 | % |
Government Long Bond 1.2x Strategy Fund | | | 0.50 | % |
Inverse Government Long Bond Strategy Fund | | | 0.90 | % |
High Yield Strategy Fund | | | 0.75 | % |
Inverse High Yield Strategy Fund | | | 0.75 | % |
U.S. Government Money Market Fund | | | 0.50 | % |
When the aggregate assets of each series of the Trust (excluding the Long Short Equity Fund, Managed Futures Strategy Fund and Multi-Hedge Strategies Fund) and each series of Rydex Dynamic Funds equal or exceed $10 billion, the advisory fee rate paid by each individual Fund will be reduced in accordance with the asset level and breakpoint schedule set forth below.
Fund Assets Under Management | | Fund Asset-Based
Breakpoint Reductions | |
$500 million - $1 billion | | | 0.025 | % |
> $1 billion - $2 billion | | | 0.050 | % |
> $2 billion | | | 0.075 | % |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted a Distribution Plan applicable to A-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Funds will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services.
The Board has adopted a separate Distribution and Shareholder Services Plan applicable to C-Class shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates a shareholder’s financial adviser for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial adviser an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial adviser. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2020, GFD retained sales charges of $122,345 relating to sales of A-Class shares of the Trust.
180 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. Fee waivers will be calculated at the investing Fund level without regard to any expense cap, if any, in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended March 31, 2020, the following Funds waived fees related to investments in affiliated funds:
Fund | | Amount Waived | |
Nova Fund | | $ | 31,034 | |
Inverse S&P 500® Strategy Fund | | | 12,139 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 18,655 | |
Inverse NASDAQ-100® Strategy Fund | | | 4,613 | |
Mid-Cap 1.5x Strategy Fund | | | 10,857 | |
Inverse Mid-Cap Strategy Fund | | | 609 | |
Russell 2000® 1.5x Strategy Fund | | | 5,939 | |
Inverse Russell 2000® Strategy Fund | | | 2,538 | |
Dow Jones Industrial Average® Fund | | | 6,814 | |
Government Long Bond 1.2x Strategy Fund | | | 26,231 | |
Inverse Government Long Bond Strategy Fund | | | 12,351 | |
High Yield Strategy Fund | | | 15,558 | |
Inverse High Yield Strategy Fund | | | 812 | |
GI has contractually agreed through August 1, 2021, to reduce fees and/or reimburse expenses for the Monthly Rebalance NASDAQ-100® 2x Strategy Fund to the extent necessary to keep net operating expenses for A-Class, C-Class and H-Class shares (including Rule 12b-1 fees if any) (excluding brokerage, dividends on securities sold short, acquired fund fees and expenses, interest, taxes, litigation, indemnification, and extraordinary expenses) from exceeding 1.35%, 2.10% and 1.35% of the Fund’s A-Class, C-Class and H-Class shares average daily net assets, respectively. The Total Annual Fund Operating Expenses After Fee Waiver and /or Expense Reimbursement includes Excluded Expenses and, thus, from time to time may be higher than 1.35%, 2.10% and 1.35%, respectively. This agreement may be terminated only with the approval of the Fund’s Board.
GI and its affiliates have voluntarily agreed to waive their fees, including but not limited to accounting, shareholder investor services and investment advisory fees, in an attempt to maintain a positive net yield for the U.S. Government Money Market Fund. GI or its affiliates may terminate this voluntary waiver at any time upon notice to the Fund. When shareholder investor services fees are waived, dealer compensation will be reduced to the extent of such waiver.
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
| | THE RYDEX FUNDS ANNUAL REPORT | 181 |
NOTES TO FINANCIAL STATEMENTS (continued) |
At March 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and
Terms of Agreement | | Face Value | | | Repurchase Price | | | Collateral | | Par Value | | | Fair Value | |
J.P. Morgan Securities LLC | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.01% | | | | | | | | | | 2.00% | | | | | | | | |
Due 04/01/20 | | $ | 129,371,353 | | | $ | 129,371,389 | | | 11/30/22 | | $ | 125,405,900 | | | $ | 131,958,818 | |
| | | | | | | | | | | | | | | | | | | |
BofA Securities, Inc. | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.00% | | | | | | | | | | 2.13% | | | | | | | | |
Due 04/01/20 | | | 49,758,213 | | | | 49,758,213 | | | 08/15/21 | | | 49,322,100 | | | | 50,753,381 | |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
At March 31, 2020, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
| | | Gross Amounts Not Offset in the
Statements of Assets and Liabilities | | | | Securities Lending Collateral | |
Fund | | Value of
Securities
Loaned | | | Collateral
Received(a) | | | Net
Amount | | | | Cash
Collateral
Invested | | | Cash
Collateral
Uninvested | | | Total
Collateral | |
Nova Fund | | $ | 78 | | | $ | (78 | ) | | $ | — | | | | $ | 80 | | | $ | — | | | $ | 80 | |
S&P 500® Fund | | | 39,302 | | | | (39,302 | ) | | | — | | | | | 41,327 | | | | — | | | | 41,327 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 5,275 | | | | (5,275 | ) | | | — | | | | | 5,275 | | | | — | | | | 5,275 | |
Mid-Cap 1.5x Strategy Fund | | | 623 | | | | (623 | ) | | | — | | | | | 642 | | | | — | | | | 642 | |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
182 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 8 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended March 31, 2020 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
S&P 500® Fund | | $ | 1,631,612 | | | $ | — | | | $ | 1,631,612 | |
Inverse S&P 500® Strategy Fund | | | 484,544 | | | | — | | | | 484,544 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 208,541 | | | | — | | | | 208,541 | |
Inverse NASDAQ-100® Strategy Fund | | | 119,715 | | | | — | | | | 119,715 | |
Mid-Cap 1.5x Strategy Fund | | | 223,749 | | | | — | | | | 223,749 | |
Inverse Mid-Cap Strategy Fund | | | 5,588 | | | | — | | | | 5,588 | |
Russell 2000® Fund | | | 120,988 | | | | 444,717 | | | | 565,705 | |
Inverse Russell 2000® Strategy Fund | | | 52,740 | | | | — | | | | 52,740 | |
Dow Jones Industrial Average® Fund | | | 1,150,570 | | | | — | | | | 1,150,570 | |
Government Long Bond 1.2x Strategy Fund | | | 2,384,007 | | | | 1,920,775 | | | | 4,304,782 | |
High Yield Strategy Fund | | | 3,884,275 | | | | — | | | | 3,884,275 | |
U.S. Government Money Market Fund | | | 4,103,774 | | | | — | | | | 4,103,774 | |
The tax character of distributions paid during the year ended March 31, 2019 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
S&P 500® Fund | | $ | 3,088,202 | | | $ | 7,313 | | | $ | 3,095,515 | |
Mid-Cap 1.5x Strategy Fund | | | 752,297 | | | | — | | | | 752,297 | |
Dow Jones Industrial Average® Fund | | | 591,239 | | | | — | | | | 591,239 | |
Government Long Bond 1.2x Strategy Fund | | | 2,272,131 | | | | — | | | | 2,272,131 | |
High Yield Strategy Fund | | | 6,367,632 | | | | — | | | | 6,367,632 | |
U.S. Government Money Market Fund | | | 5,349,868 | | | | — | | | | 5,349,868 | |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
| | THE RYDEX FUNDS ANNUAL REPORT | 183 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax components of distributable earnings/(loss) as of March 31, 2020 were as follows:
Fund | | Undistributed
Ordinary
Income | | | Undistributed
Long-Term
Capital Gain | | | Net Unrealized
Appreciation
(Depreciation) | | | Accumulated
Capital and
Other Losses | | | Total | |
Nova Fund | | $ | 1,913,003 | | | $ | — | | | $ | (5,571,323 | ) | | $ | (32,724,511 | ) | | $ | (36,382,831 | ) |
S&P 500® Fund | | | 11,038,973 | | | | 10,400,477 | | | | (11,209,272 | ) | | | — | | | | 10,230,178 | |
Inverse S&P 500® Strategy Fund | | | 300,608 | | | | — | | | | 1,096,149 | | | | (210,515,413 | ) | | | (209,118,656 | ) |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | — | | | | — | | | | (20,753,350 | ) | | | (42,714,941 | ) | | | (63,468,291 | ) |
Inverse NASDAQ-100® Strategy Fund | | | 23,879 | | | | — | | | | 494,366 | | | | (37,530,476 | ) | | | (37,012,231 | ) |
Mid-Cap 1.5x Strategy Fund | | | 89,713 | | | | — | | | | (132,027 | ) | | | (8,023,914 | ) | | | (8,066,228 | ) |
Inverse Mid-Cap Strategy Fund | | | 5,436 | | | | — | | | | 16,069 | | | | (4,893,468 | ) | | | (4,871,963 | ) |
Russell 2000® 1.5x Strategy Fund | | | 25,704 | | | | — | | | | 103,541 | | | | (58,086 | ) | | | 71,159 | |
Russell 2000® Fund | | | — | | | | — | | | | 400,025 | | | | (8,188,373 | ) | | | (7,788,348 | ) |
Inverse Russell 2000® Strategy Fund | | | 6,140 | | | | — | | | | 411,278 | | | | (27,972,790 | ) | | | (27,555,372 | ) |
Dow Jones Industrial Average® Fund | | | — | | | | — | | | | (1,381,032 | ) | | | — | | | | (1,381,032 | ) |
Government Long Bond 1.2x Strategy Fund | | | 15,695,359 | | | | — | | | | 7,772,702 | | | | — | | | | 23,468,061 | |
Inverse Government Long Bond Strategy Fund | | | 122,836 | | | | — | | | | (3,783,373 | ) | | | (265,202,676 | ) | | | (268,863,213 | ) |
High Yield Strategy Fund | | | — | | | | — | | | | (533,459 | ) | | | (10,166,556 | ) | | | (10,700,015 | ) |
Inverse High Yield Strategy Fund | | | — | | | | — | | | | 75,172 | | | | (9,378,372 | ) | | | (9,303,200 | ) |
U.S. Government Money Market Fund | | | 146,241 | | | | 4,651 | | | | — | | | | — | | | | 150,892 | |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. Under the RIC Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. As of March 31, 2020, capital loss carryforwards for the Funds were as follows:
| | | Unlimited | | | | | |
Fund | | Short-Term | | | Long-Term | | | Total
Capital Loss
Carryforward | |
Nova Fund | | $ | (14,170,429 | ) | | $ | (18,554,082 | ) | | $ | (32,724,511 | ) |
Inverse S&P 500® Strategy Fund | | | (185,483,364 | ) | | | (25,032,049 | ) | | | (210,515,413 | ) |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | (39,599,124 | ) | | | (3,078,441 | ) | | | (42,677,565 | ) |
Inverse NASDAQ-100® Strategy Fund | | | (34,785,456 | ) | | | (2,745,020 | ) | | | (37,530,476 | ) |
Mid-Cap 1.5x Strategy Fund | | | (6,801,505 | ) | | | (1,222,409 | ) | | | (8,023,914 | ) |
Inverse Mid-Cap Strategy Fund | | | (4,159,892 | ) | | | (733,576 | ) | | | (4,893,468 | ) |
Russell 2000® 1.5x Strategy Fund | | | (58,086 | ) | | | — | | | | (58,086 | ) |
Inverse Russell 2000® Strategy Fund | | | (22,113,103 | ) | | | (5,859,687 | ) | | | (27,972,790 | ) |
Inverse Government Long Bond Strategy Fund | | | (214,805,942 | ) | | | (50,396,734 | ) | | | (265,202,676 | ) |
High Yield Strategy Fund | | | (8,766,669 | ) | | | — | | | | (8,766,669 | ) |
Inverse High Yield Strategy Fund | | | (7,213,340 | ) | | | (2,084,410 | ) | | | (9,297,750 | ) |
For the year ended March 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | | Utilized | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | $ | 11,284,676 | |
Mid-Cap 1.5x Strategy Fund | | | 3,039,632 | |
Inverse High Yield Strategy Fund | | | 621,103 | |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, investments in swaps, losses deferred due to wash sales, distributions in connection with redemption of fund shares, distribution reclasses, return of capital distributions received, and the disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax treatment of net
184 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
operating losses, bond premium/discount amortization, certain corporate actions, and the “mark-to-market” of certain derivatives. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of March 31, 2020 for permanent book/tax differences:
Fund | | Paid In
Capital | | | Total
Distributable
Earnings/(Loss) | |
Nova Fund | | $ | (13 | ) | | $ | 13 | |
S&P 500® Fund | | | 13,658,389 | | | | (13,658,389 | ) |
Russell 2000® 1.5x Strategy Fund | | | 72 | | | | (72 | ) |
Russell 2000® Fund | | | 448,600 | | | | (448,600 | ) |
Dow Jones Industrial Average® Fund | | | 5,637,292 | | | | (5,637,292 | ) |
Government Long Bond 1.2x Strategy Fund | | | 34,011,172 | | | | (34,011,172 | ) |
High Yield Strategy Fund | | | 517,390 | | | | (517,390 | ) |
Inverse High Yield Strategy Fund | | | (67,535 | ) | | | 67,535 | |
At March 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | | Tax
Cost | | | Tax
Unrealized
Appreciation | | | Tax
Unrealized
Depreciation | | | Net Unrealized
Appreciation/
(Depreciation) | |
Nova Fund | | $ | 43,380,823 | | | $ | — | | | $ | (5,571,323 | ) | | $ | (5,571,323 | ) |
S&P 500® Fund | | | 125,812,150 | | | | — | | | | (11,209,272 | ) | | | (11,209,272 | ) |
Inverse S&P 500® Strategy Fund | | | 94,151,590 | | | | 1,929,670 | | | | (833,521 | ) | | | 1,096,149 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 44,206,097 | | | | — | | | | (20,753,350 | ) | | | (20,753,350 | ) |
Inverse NASDAQ-100® Strategy Fund | | | 50,642,571 | | | | 770,221 | | | | (275,855 | ) | | | 494,366 | |
Mid-Cap 1.5x Strategy Fund | | | 5,188,475 | | | | 176,600 | | | | (308,627 | ) | | | (132,027 | ) |
Inverse Mid-Cap Strategy Fund | | | 960,326 | | | | 21,114 | | | | (5,045 | ) | | | 16,069 | |
Russell 2000® 1.5x Strategy Fund | | | 3,280,435 | | | | 131,540 | | | | (27,999 | ) | | | 103,541 | |
Russell 2000® Fund | | | 15,727,497 | | | | 455,824 | | | | (55,799 | ) | | | 400,025 | |
Inverse Russell 2000® Strategy Fund | | | 19,116,374 | | | | 451,850 | | | | (40,572 | ) | | | 411,278 | |
Dow Jones Industrial Average® Fund | | | 24,495,038 | | | | 361,103 | | | | (1,742,135 | ) | | | (1,381,032 | ) |
Government Long Bond 1.2x Strategy Fund | | | 108,570,109 | | | | 8,471,076 | | | | (698,374 | ) | | | 7,772,702 | |
Inverse Government Long Bond Strategy Fund | | | 31,795,005 | | | | — | | | | (3,783,373 | ) | | | (3,783,373 | ) |
High Yield Strategy Fund | | | 21,619,329 | | | | 262,298 | | | | (795,757 | ) | | | (533,459 | ) |
Inverse High Yield Strategy Fund | | | 6,098,069 | | | | 185,051 | | | | (109,879 | ) | | | 75,172 | |
U.S. Government Money Market Fund | | | 353,542,017 | | | | — | | | | — | | | | — | |
Pursuant to U.S. federal income tax regulations applicable to regulated investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2020, the following losses reflected in the accompanying financial statements were deferred for U.S. federal income tax purposes until April 1, 2020:
Fund | | Ordinary | | | Capital | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | $ | (37,376 | ) | | $ | — | |
Russell 2000® Fund | | | (21,541 | ) | | | (8,166,832 | ) |
High Yield Strategy Fund | | | (1,399,887 | ) | | | — | |
Inverse High Yield Strategy Fund | | | (80,622 | ) | | | — | |
| | THE RYDEX FUNDS ANNUAL REPORT | 185 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Securities Transactions
For the year ended March 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | | Purchases | | | Sales | |
Nova Fund | | $ | 1,662,994,076 | | | $ | 1,885,292,345 | |
S&P 500® Fund | | | 299,637,010 | | | | 333,811,580 | |
Inverse S&P 500® Strategy Fund | | | — | | | | 1,250,000 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 1,257,547,340 | | | | 1,333,112,420 | |
Inverse NASDAQ-100® Strategy Fund | | | 1,300,000 | | | | 2,150,000 | |
Mid-Cap 1.5x Strategy Fund | | | 195,272,060 | | | | 207,443,978 | |
Inverse Mid-Cap Strategy Fund | | | — | | | | 394,981 | |
Russell 2000® 1.5x Strategy Fund | | | 4,290,538 | | | | 9,501,828 | |
Russell 2000® Fund | | | 3,321,683 | | | | 25,755,383 | |
Inverse Russell 2000® Strategy Fund | | | 140,000 | | | | 800,000 | |
Dow Jones Industrial Average® Fund | | | 57,428,106 | | | | 93,020,872 | |
Government Long Bond 1.2x Strategy Fund | | | 14,300,000 | | | | 12,620,000 | |
High Yield Strategy Fund | | | — | | | | 17,980,000 | |
Inverse High Yield Strategy Fund | | | 3,630,016 | | | | 2,370,000 | |
U.S. Government Money Market Fund | | | — | | | | — | |
For the year ended March 31, 2020, the cost of purchases and proceeds from sales of government securities were as follows:
Fund | | Purchases | | | Sales | |
Government Long Bond 1.2x Strategy Fund | | $ | 1,533,284,266 | | | $ | 1,592,989,297 | |
Inverse Government Long Bond Strategy Fund | | | 420,895,750 | | | | 398,733,609 | |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended March 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | | Purchases | | | Sales | | | Realized
Gain (Loss) | |
Nova Fund | | $ | 209,284,169 | | | $ | 262,463,515 | | | $ | (2,360,106 | ) |
S&P 500® Fund | | | 139,145,863 | | | | 127,662,807 | | | | 7,243,655 | |
Inverse S&P 500® Strategy Fund | | | 4,999,125 | | | | — | | | | — | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 142,006,043 | | | | 150,509,963 | | | | (10,682,596 | ) |
Inverse NASDAQ-100® Strategy Fund | | | 1,999,650 | | | | — | | | | — | |
Mid-Cap 1.5x Strategy Fund | | | 965,492 | | | | 2,116,448 | | | | 34,360 | |
Russell 2000® 1.5x Strategy Fund | | | — | | | | 645,308 | | | | 169,995 | |
Russell 2000® Fund | | | 1,350,975 | | | | 9,622,158 | | | | (133,186 | ) |
Dow Jones Industrial Average® Fund | | | 15,614,635 | | | | 20,824,186 | | | | (97,594 | ) |
Inverse Government Long Bond Strategy Fund | | | 2,999,475 | | | | 5,004,533 | | | | (825 | ) |
High Yield Strategy Fund | | | — | | | | 3,403,083 | | | | (561 | ) |
U.S. Government Money Market Fund | | | 11,009,973 | | | | 29,994,751 | | | | (5,194 | ) |
186 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 3.02% for the year ended March 31, 2020. The Funds did not have any borrowings outstanding under this agreement at March 31, 2020.
The average daily balances borrowed for the year ended March 31, 2020, were as follows:
Fund | | Average Daily Balance | |
Nova Fund | | $ | 53,781 | |
Inverse S&P 500® Strategy Fund | | | 134 | |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 108,984 | |
Inverse NASDAQ-100® Strategy Fund | | | 1,557 | |
Russell 2000® 1.5x Strategy Fund | | | 2,967 | |
Russell 2000® Fund | | | 4,844 | |
Government Long Bond 1.2x Strategy Fund | | | 1,541 | |
Inverse Government Long Bond Strategy Fund | | | 5,809 | |
High Yield Strategy Fund | | | 70,869 | |
Note 11 – Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities (the “2017 ASU”) which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The 2017 ASU does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity.
As of April 1, 2019, the Funds have fully adopted the provisions of the 2017 ASU which were applied on a modified retrospective basis, as prescribed. The adoption did not result in a cumulative-effect adjustment as of the beginning of the period and had no impact on total distributable earnings, net assets, the current period results from operations, or any prior period information presented in the financial statements.
Note 12 – Legal Proceedings
Tribune Company
Rydex Series Funds has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Series Funds of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Series Funds, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
| | THE RYDEX FUNDS ANNUAL REPORT | 187 |
NOTES TO FINANCIAL STATEMENTS (continued) |
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments.
On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The plaintiff requested that the Court direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020.
188 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (concluded) |
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 13 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 14 – Subsequent Events
Share Splits
On May 18, 2020, the Board approved reverse share splits as follows:
Fund | Effective Date | Split Type |
Inverse Mid-Cap Strategy Fund | August 14, 2020 | One-for-five Reverse Split |
Inverse Russell 2000® Strategy Fund | August 14, 2020 | One-for-five Reverse Split |
Inverse Government Long Bond Strategy Fund | August 14, 2020 | One-for-five Reverse Split |
High Yield Strategy Fund | August 14, 2020 | One-for-five Reverse Split |
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events other than the one disclosed above, that would require adjustment to or disclosure in the Funds’ financial statements.
| | THE RYDEX FUNDS ANNUAL REPORT | 189 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Nova Fund, S&P 500® Fund, Inverse S&P 500® Strategy Fund, Monthly Rebalance NASDAQ-100® 2x Strategy Fund, Inverse NASDAQ-100® Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 1.5x Strategy Fund, Russell 2000® Fund, Inverse Russell 2000® Strategy Fund, Dow Jones Industrial Average® Fund, Government Long Bond 1.2x Strategy Fund, Inverse Government Long Bond Strategy Fund, High Yield Strategy Fund, Inverse High Yield Strategy Fund and U.S. Government Money Market Fund and the Board of Trustees of Rydex Series Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Nova Fund, S&P 500® Fund, Inverse S&P 500® Strategy Fund, Monthly Rebalance NASDAQ-100® 2x Strategy Fund, Inverse NASDAQ-100® Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 1.5x Strategy Fund, Russell 2000® Fund, Inverse Russell 2000® Strategy Fund, Dow Jones Industrial Average® Fund, Government Long Bond 1.2x Strategy Fund, Inverse Government Long Bond Strategy Fund, High Yield Strategy Fund, Inverse High Yield Strategy Fund and U.S. Government Money Market Fund (collectively referred to as the “Funds”), (sixteen of the funds constituting Rydex Series Funds (the “Trust”)), including the schedules of investments, as of March 31, 2020, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (sixteen of the funds constituting Rydex Series Funds) at March 31, 2020, and the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual Fund constituting the
Rydex Series Funds | Statement of
operations | Statements of
changes in net assets | Financial highlights |
Nova Fund S&P 500® Fund Inverse S&P 500® Strategy Fund Inverse NASDAQ-100® Strategy Fund Mid-Cap 1.5x Strategy Fund Inverse Mid-Cap Strategy Fund Russell 2000® 1.5x Strategy Fund Russell 2000® Fund Inverse Russell 2000® Strategy Fund Government Long Bond 1.2x Strategy Fund Inverse Government Long Bond Strategy Fund High Yield Strategy Fund Inverse High Yield Strategy Fund U.S. Government Money Market Fund Monthly Rebalance NASDAQ-100® 2x Strategy Fund | For the year ended March 31, 2020 | For each of the two years in the period ended March 31, 2020 | For each of the five years in the period ended March 31, 2020 |
Dow Jones Industrial Average® Fund | For the year ended March 31, 2020 | For each of the two years in the period ended March 31, 2020 | For each of the four years in the period ended March 31, 2020 and the period from December 1, 2015 (commencement of operations) through March 31, 2016 |
190 | THE RYDEX FUNDS ANNUAL REPORT | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (concluded) |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
May 28, 2020
| | THE RYDEX FUNDS ANNUAL REPORT | 191 |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2020, the following funds had the corresponding percentages qualify for the reduced tax rate pursuant to the Jobs and Growth Tax Relief and Reconciliation Act of 2003 or for the dividends received deduction for corporations. See the qualified dividend income and dividend received deduction columns, respectively, in the table below.
Additionally, of the taxable ordinary income distributions paid during the fiscal year ended March 31, 2020, the following funds had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively. See qualified interest income and qualified short-term capital gain columns, respectively, in the table below.
Fund | | Qualified
Dividend
Income | | | Dividend
Received
Deduction | | | Qualified
Interest
Income | | | Qualified
Short-Term
Capital Gain | |
S&P 500® Fund | | | 24.87 | % | | | 19.63 | % | | | 3.02 | % | | | 100.00 | % |
Monthly Rebalance NASDAQ-100® 2x Strategy Fund | | | 100.00 | % | | | 66.30 | % | | | 62.99 | % | | | 0.00 | % |
Mid-Cap 1.5x Strategy Fund | | | 86.40 | % | | | 3.37 | % | | | 0.00 | % | | | 0.00 | % |
Russell 2000® Fund | | | 79.83 | % | | | 74.20 | % | | | 0.00 | % | | | 100.00 | % |
Dow Jones Industrial Average® Fund | | | 26.54 | % | | | 21.05 | % | | | 0.00 | % | | | 100.00 | % |
Government Long Bond 1.2x Strategy Fund | | | 0.00 | % | | | 0.00 | % | | | 87.00 | % | | | 100.00 | % |
High Yield Strategy Fund | | | 0.00 | % | | | 0.00 | % | | | 40.50 | % | | | 0.00 | % |
U.S. Government Money Market Fund | | | 0.00 | % | | | 0.00 | % | | | 99.38 | % | | | 0.00 | % |
With respect to the taxable year ended March 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | | From long-term
capital gain: | | | From long-term capital
gain, using proceeds
from shareholder
redemptions: | |
S&P 500® Fund | | $ | — | | | $ | 13,658,296 | |
Russell 2000® Fund | | | 444,717 | | | | 448,601 | |
Dow Jones Industrial Average® Fund | | | — | | | | 4,659,114 | |
Government Long Bond 1.2x Strategy Fund | | | 1,920,775 | | | | 11,284,291 | |
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
192 | THE RYDEX FUNDS ANNUAL REPORT | |
OTHER INFORMATION (Unaudited)(concluded) |
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
| | THE RYDEX FUNDS ANNUAL REPORT | 193 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES | | | |
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present). Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present). Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present). Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present). Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 | Current: Retired Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present). Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chair of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chair of the Contracts Review Committee | Since 2005 (Trustee) Since 2019
(Vice Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present). Former: Harvest Volatility Edge Trust (3) (2017-2019). |
194 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES - concluded | | |
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present). Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018-present); Edward-Elmhurst Healthcare System (2012-present). Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019
(Chair of the Audit Committee) | Current: Retired. Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present). Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
| | THE RYDEX FUNDS ANNUAL REPORT | 195 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INTERESTED TRUSTEE: | | |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019
(Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present). Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | Each Trustee also serves on the boards of trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Managed Duration Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Funds and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the board of trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
196 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS | | | |
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present). Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present). Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present). Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present). Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
| | THE RYDEX FUNDS ANNUAL REPORT | 197 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS - concluded | |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present). Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present). Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
| | ● | We use your information in connection with servicing your accounts. |
| | ● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
| | ● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
| | ● | We use information for security purposes. We may use your information to protect our company and our customers. |
| | ● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
| | ● | We use information as otherwise permitted by law, as we may notify you. |
| | ● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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3.31.2020
Rydex Funds Annual Report
Domestic Equity Funds |
S&P 500® Pure Growth Fund |
S&P 500® Pure Value Fund |
S&P MidCap 400® Pure Growth Fund |
S&P MidCap 400® Pure Value Fund |
S&P SmallCap 600® Pure Growth Fund |
S&P SmallCap 600® Pure Value Fund |
International Equity Funds |
Europe 1.25x Strategy Fund |
Japan 2x Strategy Fund |
Specialty Funds |
Strengthening Dollar 2x Strategy Fund |
Weakening Dollar 2x Strategy Fund |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports may no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from a fund electronically by calling 800.820.0888, going to GuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a fund directly, you can inform the Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RTB2-ANN-0320x0321 |
| | |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
S&P 500® PURE GROWTH FUND | 10 |
S&P 500® PURE VALUE FUND | 18 |
S&P MIDCAP 400® PURE GROWTH FUND | 26 |
S&P MIDCAP 400® PURE VALUE FUND | 34 |
S&P SMALLCAP 600® PURE GROWTH FUND | 42 |
S&P SMALLCAP 600® PURE VALUE FUND | 51 |
EUROPE 1.25x STRATEGY FUND | 60 |
JAPAN 2x STRATEGY FUND | 69 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | 77 |
WEAKENING DOLLAR 2x STRATEGY FUND | 85 |
NOTES TO FINANCIAL STATEMENTS | 93 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 109 |
OTHER INFORMATION | 110 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 112 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 117 |
| | THE RYDEX FUNDS ANNUAL REPORT | 1 |
Dear Shareholder:
The fiscal year ended March 31, 2020, concluded on a somber note. Even though markets performed well for most of the period, the emergence of a novel and highly contagious form of coronavirus in the last weeks of the period adversely impacted global commercial activity and contributed to significant volatility in certain markets, unseen since the great recession of 2008.
As it spread beyond Asia to virtually every country in the world, many governments and businesses instituted quarantines and closures, which has resulted in significant disruption in manufacturing, supply chains, consumer demand and economic activity. The U.S. Federal Reserve responded quickly to provide liquidity in order to ensure that the U.S. markets continued to function efficiently. The fiscal policy included a spending bill worth over $2 trillion to assist consumers, states, small businesses and certain industries. While these actions helped stabilize the market, volatile conditions continued into April.
As discussed in this annual shareholder report, these events have affected performance of many of our funds (the “Fund” or “Funds”). We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
Security Investors, LLC (the “Investment Adviser”), the Investment Adviser for the Funds, is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm. An affiliate of Guggenheim and the Investment Adviser, Guggenheim Funds Distributors, LLC, is the distributor of the Funds.
Together, we are committed to the safety and prosperity of our clients, our employees, and our shareholders. The resources of the firm are being made fully available not only to support our clients, but also to support our employees and their families.
Please practice the appropriate prudence for the protection not only of your health and that of your friends and loved ones but also for our neighbors and communities. Thank you for the trust you place in us.
Sincerely,
Security Investors, LLC
April 30, 2020
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Inverse and leveraged Funds are not suitable for all investors. ● These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● Inverse Funds involve certain risks, which include increased volatility due to the Funds’ possible use of short sales of securities and derivatives, such as options and futures. ● The Funds’ use of derivatives, such as futures, options, and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Short-selling involves increased risks and costs. You risk paying more for a security than you received from its sale. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the Funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those Funds that use leverage as part of their investment strategy, may prevent a Fund from correlating with the monthly, quarterly, annual, or other period performance of its benchmark.
2 | THE RYDEX FUNDS ANNUAL REPORT | |
Due to the compounding of daily returns, leveraged and inverse Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those Funds that consistently apply leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The Funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a Fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the prospectus.
Pure Style Funds may not be suitable for all investors. ● The Funds are subject to the risk that large, medium and small-capitalization stocks may under-perform other segments of the equity market or the equity market as a whole. ● Value stocks are subject to the risk that the intrinsic value of the stock may never be realized by the market or that the price goes down. Growth stocks typically invest a high portion of their earnings back into their business and may lack the dividend yield that could cushion their decline in a market downturn. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing company. ● The Funds are subject to the risk that unanticipated early closings of securities exchanges and other financial markets may result in the Funds’ inability to buy or sell securities or other financial instruments on that day. In certain circumstances, it may be difficult for the Funds to purchase and sell particular investments within a reasonable time at a fair price. ● Unlike many investment companies, the Funds are not actively “managed.” This means that based on market and economic conditions, the Funds’ performance could be lower than other types of funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline ● The Funds are subject to active trading and tracking error risks, which may increase volatility, impact the Funds’ ability to achieve its investment objective and may decrease the Fund’s performance. ● These Funds are considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. ● Securities are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. ● Please read the prospectus for more detailed information regarding these and other risks.
The Strengthening Dollar 2x Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures and swap agreements may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund’s indirect exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. These risks may cause the Fund to experience higher losses and/or volatility than a Fund that does not invest in derivatives, use leverage or have exposure to foreign currencies. ● Also, the Fund is subject to active trading and tracking error risks that may increase volatility, decrease performance and impact the Fund’s ability to achieve its investment objective. This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. ● For more on these and other risks, please read the prospectus.
The Weakening Dollar 2x Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures and swap agreements may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund’s indirect exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. These risks may cause the Fund to experience higher losses and/or volatility than a fund that does not invest in derivatives, use leverage or have exposure to foreign currencies. ● Also, the Fund is subject to active trading and tracking error risks that may increase volatility, decrease performance and impact the Fund’s ability to achieve its investment objective. This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. ● For more on these and other risks, please read the prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2020 |
The 12-month period ended March 31,2020, was a wild ride for markets. While the U.S. economy was generally in good shape in 2019, recessionary fears rose throughout the year, prompting the U.S. Federal Reserve (the “Fed”) to announce a rate cut on July 31, the first since 2008, amid growing downside risks to policymakers’ baseline growth and inflation forecasts. Key among those risks were slowing global growth, the threat of additional U.S.-China tariffs, and the possible ramifications surrounding Brexit. The Fed subsequently cut rates twice more in 2019, which caused markets to rally toward the end of the year and into early 2020. Stocks reached new highs and credit spreads tightened to historic levels. Since then, the global outbreak of the coronavirus, COVID-19, has been at the center of everything. As of this writing, COVID-19 has spread to 210 countries, resulted in over 2.5 million cases, and caused over 170,000 deaths. Thus far, the U.S. makes up more than 30% of global cases, and 25% of global deaths. States have required the labor force to work from home if possible, individuals to practice social distancing, and non-essential businesses to shut down.
Closures, quarantines, and social distancing efforts have impacted the travel, hospitality, restaurants, and retail industries, with activity down 100% in some areas of the country. Further exacerbating the decline in output will be reduced business investment, which was already stalling due to falling profits, trade conflicts, and political uncertainty. The coronavirus shock and collapse in oil prices will likely further depress capital expenditures.
In response to the crisis, the Federal Open Market Committee cut rates by a further 125 basis points in the first quarter of 2020 and passed a series of stimulus programs. Among these were the Primary and Secondary Market Corporate Credit Facilities, which are lending programs primarily targeting investment-grade corporate bond issuers, implemented in concert with the U.S. Treasury. It was only after the announcement of this program that corporate credit found some relief from the selloff, but we expect this relief may be temporary.
With an alphabet soup of monetary programs targeting relief from the coronavirus impact, fiscal policy has also stepped up to the plate with a spending bill worth over $2 trillion that aims to assist consumers, states, small businesses, and certain industries. There is no question that these programs will help ease the economic fallout from virus containment measures, but even $2 trillion may be too small given the magnitude of the economic shock that we are facing. Additionally, it is far from clear that fiscal measures are an adequate solution to the issue at hand: the physical impediment to consumer spending. Fiscal and monetary policy can do their part, but ultimately it is public health policy that will likely be the greatest determinant of the economic outlook.
For the 12 months ended March 31, 2020, the Standard & Poor’s 500® (“S&P 500”) Index* returned -6.98%. The decline, while significant, represents something of a recovery in stocks. The S&P 500 peaked at 3386.15 on February 19, 2020, before plummeting 33.9% to a low of 2237.40 on March 23, 2020, then recovering some lost ground by the end of the month.
The consensus estimate for S&P 500 earnings per share in 2020 is still around $150. Our research shows S&P 500 earnings per share could fall below $100. Similarly, economists have no way to calibrate how bad the economic data could be based on history. The March U.S. non-farm payrolls report was evidence of this, as it showed a decline in payrolls of 700,000 jobs versus survey expectations of a decline of only 100,000 jobs. We currently expect that second quarter U.S. real gross domestic product (“GDP”) quarter-over-quarter growth could fall by 40% annualized and the unemployment rate could rise to at least 20%. Beyond that, the severity of the crisis depends on containment of the virus and the effectiveness of social distancing measures put in place, but expectations for a quick and sustained V-shaped recovery appear overly optimistic.
For the 12 months ended March 31, 2020, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.92%. The return of the MSCI Emerging Markets Index* was -17.36%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted an 8.93% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -6.94%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.25% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
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ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2020 |
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
Nikkei-225 Stock Average Index is a price-weighted index comprised of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P 500® Pure Growth Index is narrow in focus, containing only those S&P 500 Index companies with strong growth characteristics as selected by S&P. The S&P 500 Index is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues).
S&P 500® Pure Value Index is narrow in focus, containing only those S&P 500 Index companies with strong value characteristics as selected by S&P. The S&P 500 Index is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues).
S&P MidCap 400® Pure Growth Index is narrow in focus, containing only those S&P MidCap 400 Index companies with strong growth characteristics as selected by S&P. The S&P MidCap 400 Index measures the performance of the mid-capitalization sector of the U.S. equity market.
S&P MidCap 400® Pure Value Index is narrow in focus, containing only those S&P MidCap 400 Index companies with strong value characteristics as selected by S&P. The S&P MidCap 400 Index measures the performance of the mid-capitalization sector of the U.S. equity market.
S&P SmallCap 600® Pure Growth Index is narrow in focus, containing only those S&P SmallCap 600 Index companies with strong growth characteristics as selected by S&P. The S&P SmallCap 600 Index measures the performance of the small-capitalization sector of the U.S. equity market.
S&P SmallCap 600® Pure Value Index is narrow in focus, containing only those S&P SmallCap 600 Index companies with strong value characteristics as selected by S&P. The S&P SmallCap 600 Index measures the performance of the small-capitalization sector of the U.S. equity market.
STOXX® Europe 50 Index provides a blue-chip representation of supersector leaders in the eurozone. The index covers 50 stocks from 12 eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
USD or U.S. Dollar Index® (USDX) is an index that determines the relative value of the United States dollar to a basket of foreign currencies. This formulated “basket” of currencies comprises the weighting of six other currencies as follows: Euro (EUR), 57.6% + Japanese Yen (JPY), 13.6% + Pound Sterling (GBP), 11.9% + Canadian Dollar (CAD), 9.1% + Swedish Krona (SEK), 4.2% + Swiss Franc (CHF) 3.6%.
| | THE RYDEX FUNDS ANNUAL REPORT | 5 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) | |
Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in-line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period on a cumulative basis. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods.
An Example of Compounding
For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6.0% gain and an expectation that the fund will rise by 9.0%. On the same day, the fund’s net asset value per share (“NAV”) increases from $10.00 to $10.90 for a gain of 9.0% — in line with its benchmark.
On day two, assume the index falls from 106 to 99 for a loss of about 6.6%. The fund, as expected, falls 9.9% to a price of $9.82. On each day, the fund performed exactly in line with its benchmark, but for the two-day period, the fund was down 1.8%, while the index was down only 1.0%. Without taking into account the daily compounding of returns, one would expect the fund to lose 1.5% and would see the fund as trailing by 0.3% when in fact it had performed perfectly. This example is summarized in the table below.
| Index
Level | Index
Performance | Fund
Expectation | Fund
NAV | Fund
Performance | Assessment |
Start | 100 | | | $ 10.00 | | |
Day 1 | 106 | 6.0% | 9.0% | $ 10.90 | 9.0% | In line |
Day 2 | 99 | -6.6% | -9.9% | $ 9.82 | -9.9% | In line |
Cumulative | | -1.0% | -1.5% | | -1.8% | -0.3% |
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
6 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) | |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning September 30, 2019 and ending March 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 1. Based on actual Fund return3 | | | | | |
S&P 500® Pure Growth Fund | | | | | |
A-Class | 1.64% | (15.52%) | $ 1,000.00 | $ 844.80 | $ 7.56 |
C-Class | 2.38% | (15.83%) | 1,000.00 | 841.70 | 10.96 |
H-Class | 1.64% | (15.53%) | 1,000.00 | 844.70 | 7.56 |
S&P 500® Pure Value Fund | | | | | |
A-Class | 1.64% | (37.57%) | 1,000.00 | 624.30 | 6.66 |
C-Class | 2.38% | (37.80%) | 1,000.00 | 622.00 | 9.65 |
H-Class | 1.64% | (37.57%) | 1,000.00 | 624.30 | 6.66 |
S&P MidCap 400® Pure Growth Fund | | | | | |
A-Class | 1.64% | (21.17%) | 1,000.00 | 788.30 | 7.33 |
C-Class | 2.38% | (21.47%) | 1,000.00 | 785.30 | 10.62 |
H-Class | 1.64% | (21.17%) | 1,000.00 | 788.30 | 7.33 |
S&P MidCap 400® Pure Value Fund | | | | | |
A-Class | 1.63% | (38.72%) | 1,000.00 | 612.80 | 6.57 |
C-Class | 2.38% | (38.97%) | 1,000.00 | 610.30 | 9.58 |
H-Class | 1.64% | (38.73%) | 1,000.00 | 612.70 | 6.61 |
S&P SmallCap 600® Pure Growth Fund | | | | | |
A-Class | 1.64% | (28.38%) | 1,000.00 | 716.20 | 7.04 |
C-Class | 2.39% | (28.66%) | 1,000.00 | 713.40 | 10.24 |
H-Class | 1.64% | (28.39%) | 1,000.00 | 716.10 | 7.04 |
S&P SmallCap 600® Pure Value Fund | | | | | |
A-Class | 1.63% | (46.36%) | 1,000.00 | 536.40 | 6.26 |
C-Class | 2.38% | (46.57%) | 1,000.00 | 534.30 | 9.13 |
H-Class | 1.65% | (46.39%) | 1,000.00 | 536.10 | 6.34 |
Europe 1.25x Strategy Fund | | | | | |
A-Class | 1.71% | (20.75%) | 1,000.00 | 792.50 | 7.66 |
C-Class | 2.44% | (20.96%) | 1,000.00 | 790.40 | 10.92 |
H-Class | 1.75% | (20.75%) | 1,000.00 | 792.50 | 7.84 |
Japan 2x Strategy Fund | | | | | |
A-Class | 1.59% | (26.83%) | 1,000.00 | 731.70 | 6.88 |
C-Class | 2.33% | (27.10%) | 1,000.00 | 729.00 | 10.07 |
H-Class | 1.59% | (26.83%) | 1,000.00 | 731.70 | 6.88 |
Strengthening Dollar 2x Strategy Fund | | | | | |
A-Class | 1.88% | (0.30%) | 1,000.00 | 997.00 | 9.39 |
C-Class | 2.62% | (0.67%) | 1,000.00 | 993.30 | 13.06 |
H-Class | 1.89% | (0.32%) | 1,000.00 | 996.80 | 9.43 |
Weakening Dollar 2x Strategy Fund | | | | | |
A-Class | 1.92% | (2.76%) | 1,000.00 | 972.40 | 9.47 |
C-Class | 2.66% | (3.15%) | 1,000.00 | 968.50 | 13.09 |
H-Class | 1.91% | (2.80%) | 1,000.00 | 972.00 | 9.42 |
8 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 2. Based on hypothetical 5% return (before expenses) |
S&P 500® Pure Growth Fund | | | | | |
A-Class | 1.64% | 5.00% | $ 1,000.00 | $ 1,016.80 | $ 8.27 |
C-Class | 2.38% | 5.00% | 1,000.00 | 1,013.10 | 11.98 |
H-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
S&P 500® Pure Value Fund | | | | | |
A-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
C-Class | 2.38% | 5.00% | 1,000.00 | 1,013.10 | 11.98 |
H-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
S&P MidCap 400® Pure Growth Fund | | | | | |
A-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
C-Class | 2.38% | 5.00% | 1,000.00 | 1,013.10 | 11.98 |
H-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
S&P MidCap 400® Pure Value Fund | | | | | |
A-Class | 1.63% | 5.00% | 1,000.00 | 1,016.85 | 8.22 |
C-Class | 2.38% | 5.00% | 1,000.00 | 1,013.10 | 11.98 |
H-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
S&P SmallCap 600® Pure Growth Fund | | | | | |
A-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
C-Class | 2.39% | 5.00% | 1,000.00 | 1,013.05 | 12.03 |
H-Class | 1.64% | 5.00% | 1,000.00 | 1,016.80 | 8.27 |
S&P SmallCap 600® Pure Value Fund | | | | | |
A-Class | 1.63% | 5.00% | 1,000.00 | 1,016.85 | 8.22 |
C-Class | 2.38% | 5.00% | 1,000.00 | 1,013.10 | 11.98 |
H-Class | 1.65% | 5.00% | 1,000.00 | 1,016.75 | 8.32 |
Europe 1.25x Strategy Fund | | | | | |
A-Class | 1.71% | 5.00% | 1,000.00 | 1,016.45 | 8.62 |
C-Class | 2.44% | 5.00% | 1,000.00 | 1,012.80 | 12.28 |
H-Class | 1.75% | 5.00% | 1,000.00 | 1,016.25 | 8.82 |
Japan 2x Strategy Fund | | | | | |
A-Class | 1.59% | 5.00% | 1,000.00 | 1,017.05 | 8.02 |
C-Class | 2.33% | 5.00% | 1,000.00 | 1,013.35 | 11.73 |
H-Class | 1.59% | 5.00% | 1,000.00 | 1,017.05 | 8.02 |
Strengthening Dollar 2x Strategy Fund | | | | | |
A-Class | 1.88% | 5.00% | 1,000.00 | 1,015.60 | 9.47 |
C-Class | 2.62% | 5.00% | 1,000.00 | 1,011.90 | 13.18 |
H-Class | 1.89% | 5.00% | 1,000.00 | 1,015.55 | 9.52 |
Weakening Dollar 2x Strategy Fund | | | | | |
A-Class | 1.92% | 5.00% | 1,000.00 | 1,015.40 | 9.67 |
C-Class | 2.66% | 5.00% | 1,000.00 | 1,011.70 | 13.38 |
H-Class | 1.91% | 5.00% | 1,000.00 | 1,015.45 | 9.62 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
3 | Actual cumulative return at net asset value for the period September 30, 2019 to March 31, 2020. |
| | THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
S&P 500® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for large-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P 500® Pure Growth Index (the “underlying index”).
For the year ended March 31, 2020, S&P 500 Pure Growth Fund H-Class returned -13.77%, compared with a return of -12.32% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The sectors contributing the most to the return of the underlying index were Health Care, Consumer Staples, and Communication Services. The sectors detracting the most from return were Consumer Discretionary, Information Technology, and Energy.
The holdings contributing the most to the return of the underlying index were Advanced Micro Devices, Inc., Vertex Pharmaceuticals, Inc., and Anadarko Petroleum Corp. The holdings detracting the most from return were PulteGroup, Inc., Synchrony Financial, and Paycom Software, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | September 1, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
Ten Largest Holdings (% of Total Net Assets) |
ServiceNow, Inc. | 2.3% |
MSCI, Inc. — Class A | 1.8% |
Vertex Pharmaceuticals, Inc. | 1.8% |
Fortinet, Inc. | 1.8% |
Lam Research Corp. | 1.7% |
Paycom Software, Inc. | 1.7% |
Facebook, Inc. — Class A | 1.7% |
Micron Technology, Inc. | 1.6% |
Incyte Corp. | 1.6% |
Adobe, Inc. | 1.6% |
Top Ten Total | 17.6% |
“Ten Largest Holdings” excludes any temporary cash investments.
10 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (13.76%) | 3.15% | 9.80% |
A-Class Shares with sales charge‡ | (17.86%) | 2.15% | 9.27% |
C-Class Shares | (14.40%) | 2.38% | 8.98% |
C-Class Shares with CDSC§ | (15.21%) | 2.38% | 8.98% |
H-Class Shares | (13.77%) | 3.15% | 9.80% |
S&P 500 Pure Growth Index | (12.32%) | 4.87% | 11.70% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
S&P 500® PURE GROWTH FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.8% |
| | | | | | | | | |
Technology - 32.6% |
ServiceNow, Inc.* | | | 3,160 | | | $ | 905,593 | |
MSCI, Inc. — Class A | | | 2,494 | | | | 720,666 | |
Fortinet, Inc.* | | | 6,968 | | | | 704,952 | |
Lam Research Corp. | | | 2,870 | | | | 688,800 | |
Paycom Software, Inc.* | | | 3,350 | | | | 676,734 | |
Micron Technology, Inc.* | | | 15,320 | | | | 644,359 | |
Adobe, Inc.* | | | 2,010 | | | | 639,662 | |
ANSYS, Inc.* | | | 2,476 | | | | 575,596 | |
KLA Corp. | | | 3,815 | | | | 548,368 | |
Microsoft Corp. | | | 3,410 | | | | 537,791 | |
Applied Materials, Inc. | | | 11,470 | | | | 525,556 | |
Apple, Inc. | | | 1,910 | | | | 485,694 | |
Synopsys, Inc.* | | | 3,673 | | | | 473,046 | |
Cadence Design Systems, Inc.* | | | 7,020 | | | | 463,601 | |
NVIDIA Corp. | | | 1,720 | | | | 453,392 | |
Fiserv, Inc.* | | | 4,300 | | | | 408,457 | |
salesforce.com, Inc.* | | | 2,646 | | | | 380,971 | |
Broadcom, Inc. | | | 1,590 | | | | 376,989 | |
Microchip Technology, Inc. | | | 5,543 | | | | 375,815 | |
Xerox Holdings Corp. | | | 17,780 | | | | 336,753 | |
Advanced Micro Devices, Inc.* | | | 6,381 | | | | 290,208 | |
Take-Two Interactive Software, Inc.* | | | 2,376 | | | | 281,817 | |
Autodesk, Inc.* | | | 1,741 | | | | 271,770 | |
Qorvo, Inc.* | | | 3,031 | | | | 244,390 | |
Intuit, Inc. | | | 1,057 | | | | 243,110 | |
QUALCOMM, Inc. | | | 3,560 | | | | 240,834 | |
Analog Devices, Inc. | | | 2,580 | | | | 231,297 | |
Zebra Technologies Corp. — Class A* | | | 1,120 | | | | 205,632 | |
Total Technology | | | | | | | 12,931,853 | |
| | | | | | | | | |
Consumer, Non-cyclical - 15.8% |
Vertex Pharmaceuticals, Inc.* | | | 2,977 | | | | 708,377 | |
Incyte Corp.* | | | 8,757 | | | | 641,275 | |
United Rentals, Inc.* | | | 4,800 | | | | 493,920 | |
PayPal Holdings, Inc.* | | | 4,999 | | | | 478,604 | |
Edwards Lifesciences Corp.* | | | 2,395 | | | | 451,745 | |
MarketAxess Holdings, Inc. | | | 1,256 | | | | 417,708 | |
FleetCor Technologies, Inc.* | | | 2,200 | | | | 410,388 | |
Align Technology, Inc.* | | | 2,111 | | | | 367,208 | |
Moody’s Corp. | | | 1,694 | | | | 358,281 | |
ResMed, Inc. | | | 2,260 | | | | 332,875 | |
Estee Lauder Companies, Inc. — Class A | | | 1,840 | | | | 293,186 | |
Cintas Corp. | | | 1,656 | | | | 286,852 | |
S&P Global, Inc. | | | 1,169 | | | | 286,464 | |
Intuitive Surgical, Inc.* | | | 537 | | | | 265,928 | |
IDEXX Laboratories, Inc.* | | | 1,060 | | | | 256,774 | |
Thermo Fisher Scientific, Inc. | | | 841 | | | | 238,508 | |
Total Consumer, Non-cyclical | | | | | | | 6,288,093 | |
| | | | | | | | | |
Consumer, Cyclical - 14.2% |
Copart, Inc.* | | | 7,348 | | | | 503,485 | |
Hilton Worldwide Holdings, Inc. | | | 7,247 | | | | 494,535 | |
PulteGroup, Inc. | | | 20,980 | | | | 468,274 | |
Chipotle Mexican Grill, Inc. — Class A* | | | 685 | | | | 448,264 | |
Dollar General Corp. | | | 2,662 | | | | 401,989 | |
PACCAR, Inc. | | | 6,280 | | | | 383,897 | |
NVR, Inc.* | | | 140 | | | | 359,675 | |
DR Horton, Inc. | | | 10,110 | | | | 343,740 | |
Yum! Brands, Inc. | | | 4,900 | | | | 335,797 | |
Starbucks Corp. | | | 4,460 | | | | 293,200 | |
CarMax, Inc.* | | | 5,250 | | | | 282,608 | |
AutoZone, Inc.* | | | 317 | | | | 268,182 | |
Tiffany & Co. | | | 1,910 | | | | 247,345 | |
Ross Stores, Inc. | | | 2,784 | | | | 242,124 | |
O’Reilly Automotive, Inc.* | | | 801 | | | | 241,141 | |
TJX Companies, Inc. | | | 3,846 | | | | 183,877 | |
Wynn Resorts Ltd. | | | 2,290 | | | | 137,835 | |
Total Consumer, Cyclical | | | | | | | 5,635,968 | |
| | | | | | | | | |
Industrial - 11.7% |
Old Dominion Freight Line, Inc. | | | 3,785 | | | | 496,819 | |
L3Harris Technologies, Inc. | | | 2,440 | | | | 439,493 | |
Northrop Grumman Corp. | | | 1,300 | | | | 393,315 | |
TransDigm Group, Inc. | | | 1,204 | | | | 385,509 | |
Keysight Technologies, Inc.* | | | 4,197 | | | | 351,205 | |
Kansas City Southern | | | 2,620 | | | | 333,212 | |
Masco Corp. | | | 9,080 | | | | 313,896 | |
Lockheed Martin Corp. | | | 860 | | | | 291,497 | |
Garmin Ltd. | | | 3,390 | | | | 254,114 | |
AMETEK, Inc. | | | 3,472 | | | | 250,053 | |
Vulcan Materials Co. | | | 2,300 | | | | 248,561 | |
Fortune Brands Home & Security, Inc. | | | 5,530 | | | | 239,172 | |
Martin Marietta Materials, Inc. | | | 1,200 | | | | 227,076 | |
Roper Technologies, Inc. | | | 665 | | | | 207,354 | |
Allegion plc | | | 2,110 | | | | 194,162 | |
Total Industrial | | | | | | | 4,625,438 | |
| | | | | | | | | |
Communications - 10.3% |
Facebook, Inc. — Class A* | | | 4,043 | | | | 674,372 | |
Netflix, Inc.* | | | 1,588 | | | | 596,294 | |
Charter Communications, Inc. — Class A* | | | 1,140 | | | | 497,393 | |
Amazon.com, Inc.* | | | 250 | | | | 487,430 | |
CDW Corp. | | | 3,769 | | | | 351,535 | |
eBay, Inc. | | | 11,160 | | | | 335,470 | |
Arista Networks, Inc.* | | | 1,292 | | | | 261,695 | |
Motorola Solutions, Inc. | | | 1,809 | | | | 240,452 | |
Alphabet, Inc. — Class A* | | | 203 | | | | 235,876 | |
Alphabet, Inc. — Class C* | | | 201 | | | | 233,725 | |
Booking Holdings, Inc.* | | | 130 | | | | 174,891 | |
Total Communications | | | | | | | 4,089,133 | |
| | | | | | | | | |
Financial - 8.8% |
Mastercard, Inc. — Class A | | | 2,420 | | | | 584,575 | |
Visa, Inc. — Class A | | | 3,023 | | | | 487,066 | |
CBRE Group, Inc. — Class A* | | | 11,530 | | | | 434,796 | |
Equinix, Inc. REIT | | | 695 | | | | 434,076 | |
SBA Communications Corp. REIT | | | 1,467 | | | | 396,046 | |
Cboe Global Markets, Inc. | | | 4,186 | | | | 373,601 | |
Synchrony Financial | | | 20,169 | | | | 324,519 | |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
S&P 500® PURE GROWTH FUND | |
| | Shares | | | Value | |
American Tower Corp. — Class A REIT | | | 1,290 | | | $ | 280,898 | |
Western Union Co. | | | 9,930 | | | | 180,031 | |
Total Financial | | | | | | | 3,495,608 | |
| | | | | | | | | |
Basic Materials - 4.3% |
FMC Corp. | | | 6,650 | | | | 543,238 | |
Sherwin-Williams Co. | | | 840 | | | | 385,997 | |
Dow, Inc. | | | 11,750 | | | | 343,570 | |
Air Products & Chemicals, Inc. | | | 1,246 | | | | 248,714 | |
Celanese Corp. — Class A | | | 2,430 | | | | 178,338 | |
Total Basic Materials | | | | | | | 1,699,857 | |
| | | | | | | | | |
Energy - 1.2% |
ConocoPhillips | | | 8,733 | | | | 268,976 | |
Hess Corp. | | | 5,970 | | | | 198,801 | |
Total Energy | | | | | | | 467,777 | |
| | | | | | | | | |
Utilities - 0.9% |
NRG Energy, Inc. | | | 13,854 | | | | 377,660 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $44,298,710) | | | | | | | 39,611,387 | |
| | Face
Amount | | | | |
REPURCHASE AGREEMENTS††,1 - 0.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 111,322 | | | | 111,322 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 42,816 | | | | 42,816 | |
Total Repurchase Agreements | | | | |
(Cost $154,138) | | | | | | | 154,138 | |
| | | | | | | | | |
Total Investments - 100.2% | | | | |
(Cost $44,452,848) | | $ | 39,765,525 | |
Other Assets & Liabilities, net - (0.2)% | | | (78,638 | ) |
Total Net Assets - 100.0% | | $ | 39,686,887 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 39,611,387 | | | $ | — | | | $ | — | | | $ | 39,611,387 | |
Repurchase Agreements | | | — | | | | 154,138 | | | | — | | | | 154,138 | |
Total Assets | | $ | 39,611,387 | | | $ | 154,138 | | | $ | — | | | $ | 39,765,525 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
S&P 500® PURE GROWTH FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value (cost $44,298,710) | | $ | 39,611,387 | |
Repurchase agreements, at value (cost $154,138) | | | 154,138 | |
Cash | | | 123,574 | |
Receivables: |
Dividends | | | 19,002 | |
Fund shares sold | | | 15,621 | |
Total assets | | | 39,923,722 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 102,012 | |
Management fees | | | 29,146 | |
Distribution and service fees | | | 13,956 | |
Transfer agent and administrative fees | | | 13,135 | |
Portfolio accounting fees | | | 3,886 | |
Trustees’ fees* | | | 1,109 | |
Miscellaneous | | | 73,591 | |
Total liabilities | | | 236,835 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 39,686,887 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 44,208,005 | |
Total distributable earnings (loss) | | | (4,521,118 | ) |
Net assets | | $ | 39,686,887 | |
| | | | | |
A-Class: |
Net assets | | $ | 7,656,100 | |
Capital shares outstanding | | | 142,012 | |
Net asset value per share | | $ | 53.91 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 56.60 | |
| | | | | |
C-Class: |
Net assets | | $ | 6,050,071 | |
Capital shares outstanding | | | 130,204 | |
Net asset value per share | | $ | 46.47 | |
| | | | | |
H-Class: |
Net assets | | $ | 25,980,716 | |
Capital shares outstanding | | | 482,084 | |
Net asset value per share | | $ | 53.89 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 1,035,306 | |
Interest | | | 9,135 | |
Income from securities lending, net | | | 31 | |
Total investment income | | | 1,044,472 | |
| | | | | |
Expenses: |
Management fees | | | 656,877 | |
Distribution and service fees: |
A-Class | | | 32,080 | |
C-Class | | | 96,130 | |
H-Class | | | 162,846 | |
Transfer agent and administrative fees | | | 222,379 | |
Portfolio accounting fees | | | 87,583 | |
Registration fees | | | 78,554 | |
Professional fees | | | 37,372 | |
Trustees’ fees* | | | 20,849 | |
Custodian fees | | | 12,517 | |
Line of credit fees | | | 106 | |
Miscellaneous | | | 90,880 | |
Total expenses | | | 1,498,173 | |
Net investment loss | | | (453,701 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 17,941,754 | |
Net realized gain | | | 17,941,754 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (22,350,953 | ) |
Net change in unrealized appreciation (depreciation) | | | (22,350,953 | ) |
Net realized and unrealized loss | | | (4,409,199 | ) |
Net decrease in net assets resulting from operations | | $ | (4,862,900 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE GROWTH FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (453,701 | ) | | $ | (1,068,747 | ) |
Net realized gain on investments | | | 17,941,754 | | | | 10,030,108 | |
Net change in unrealized appreciation (depreciation) on investments | | | (22,350,953 | ) | | | (7,422,006 | ) |
Net increase (decrease) in net assets resulting from operations | | | (4,862,900 | ) | | | 1,539,355 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (584,364 | ) | | | (870,081 | ) |
C-Class | | | (524,964 | ) | | | (600,984 | ) |
H-Class | | | (3,413,894 | ) | | | (4,191,710 | ) |
Total distributions to shareholders | | | (4,523,222 | ) | | | (5,662,775 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 2,672,682 | | | | 10,908,532 | |
C-Class | | | 2,747,902 | | | | 8,317,472 | |
H-Class | | | 238,586,181 | | | | 199,338,871 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 579,514 | | | | 864,007 | |
C-Class | | | 521,531 | | | | 594,072 | |
H-Class | | | 3,389,391 | | | | 4,160,522 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (9,216,614 | ) | | | (13,543,315 | ) |
C-Class | | | (5,821,318 | ) | | | (11,926,777 | ) |
H-Class | | | (292,741,951 | ) | | | (226,573,703 | ) |
Net decrease from capital share transactions | | | (59,282,682 | ) | | | (27,860,319 | ) |
Net decrease in net assets | | | (68,668,804 | ) | | | (31,983,739 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 108,355,691 | | | | 140,339,430 | |
End of year | | $ | 39,686,887 | | | $ | 108,355,691 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 39,759 | | | | 167,257 | |
C-Class | | | 46,633 | | | | 137,043 | |
H-Class | | | 3,527,207 | | | | 3,043,070 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 8,697 | | | | 14,286 | |
C-Class | | | 9,061 | | | | 11,196 | |
H-Class | | | 50,884 | | | | 68,803 | |
Shares redeemed | | | | | | | | |
A-Class | | | (141,129 | ) | | | (206,325 | ) |
C-Class | | | (104,655 | ) | | | (196,508 | ) |
H-Class | | | (4,350,136 | ) | | | (3,506,875 | ) |
Net decrease in shares | | | (913,679 | ) | | | (468,053 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
S&P 500® PURE GROWTH FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 65.86 | | | $ | 66.50 | | | $ | 57.84 | | | $ | 51.74 | | | $ | 55.85 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.29 | ) | | | (.50 | ) | | | (.36 | ) | | | (.44 | ) | | | (.22 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (8.09 | ) | | | 3.42 | | | | 12.57 | | | | 6.56 | | | | (2.47 | ) |
Total from investment operations | | | (8.38 | ) | | | 2.92 | | | | 12.21 | | | | 6.12 | | | | (2.69 | ) |
Less distributions from: |
Net realized gains | | | (3.57 | ) | | | (3.56 | ) | | | (3.55 | ) | | | (.02 | ) | | | (1.42 | ) |
Total distributions | | | (3.57 | ) | | | (3.56 | ) | | | (3.55 | ) | | | (.02 | ) | | | (1.42 | ) |
Net asset value, end of period | | $ | 53.91 | | | $ | 65.86 | | | $ | 66.50 | | | $ | 57.84 | | | $ | 51.74 | |
|
Total Returnb | | | (13.76 | %) | | | 4.88 | % | | | 21.39 | % | | | 11.84 | % | | | (4.90 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 7,656 | | | $ | 15,456 | | | $ | 17,254 | | | $ | 15,575 | | | $ | 24,037 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.43 | %) | | | (0.75 | %) | | | (0.56 | %) | | | (0.82 | %) | | | (0.41 | %) |
Total expenses | | | 1.63 | % | | | 1.61 | % | | | 1.53 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 282 | % | | | 177 | % | | | 215 | % | | | 184 | % | | | 290 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 57.65 | | | $ | 59.10 | | | $ | 52.13 | | | $ | 46.99 | | | $ | 51.23 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.69 | ) | | | (.90 | ) | | | (.75 | ) | | | (.77 | ) | | | (.57 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (6.92 | ) | | | 3.01 | | | | 11.27 | | | | 5.93 | | | | (2.25 | ) |
Total from investment operations | | | (7.61 | ) | | | 2.11 | | | | 10.52 | | | | 5.16 | | | | (2.82 | ) |
Less distributions from: |
Net realized gains | | | (3.57 | ) | | | (3.56 | ) | | | (3.55 | ) | | | (.02 | ) | | | (1.42 | ) |
Total distributions | | | (3.57 | ) | | | (3.56 | ) | | | (3.55 | ) | | | (.02 | ) | | | (1.42 | ) |
Net asset value, end of period | | $ | 46.47 | | | $ | 57.65 | | | $ | 59.10 | | | $ | 52.13 | | | $ | 46.99 | |
|
Total Returnb | | | (14.40 | %) | | | 4.09 | % | | | 20.50 | % | | | 10.99 | % | | | (5.61 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 6,050 | | | $ | 10,329 | | | $ | 13,442 | | | $ | 10,951 | | | $ | 17,546 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.18 | %) | | | (1.52 | %) | | | (1.32 | %) | | | (1.57 | %) | | | (1.16 | %) |
Total expenses | | | 2.38 | % | | | 2.36 | % | | | 2.28 | % | | | 2.27 | % | | | 2.25 | % |
Portfolio turnover rate | | | 282 | % | | | 177 | % | | | 215 | % | | | 184 | % | | | 290 | % |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE GROWTH FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 65.84 | | | $ | 66.49 | | | $ | 57.83 | | | $ | 51.73 | | | $ | 55.84 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.29 | ) | | | (.53 | ) | | | (.38 | ) | | | (.44 | ) | | | (.18 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (8.09 | ) | | | 3.44 | | | | 12.59 | | | | 6.56 | | | | (2.51 | ) |
Total from investment operations | | | (8.38 | ) | | | 2.91 | | | | 12.21 | | | | 6.12 | | | | (2.69 | ) |
Less distributions from: |
Net realized gains | | | (3.57 | ) | | | (3.56 | ) | | | (3.55 | ) | | | (.02 | ) | | | (1.42 | ) |
Total distributions | | | (3.57 | ) | | | (3.56 | ) | | | (3.55 | ) | | | (.02 | ) | | | (1.42 | ) |
Net asset value, end of period | | $ | 53.89 | | | $ | 65.84 | | | $ | 66.49 | | | $ | 57.83 | | | $ | 51.73 | |
|
Total Return | | | (13.77 | %) | | | 4.86 | % | | | 21.40 | % | | | 11.84 | % | | | (4.91 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 25,981 | | | $ | 82,570 | | | $ | 109,644 | | | $ | 78,673 | | | $ | 113,223 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.44 | %) | | | (0.79 | %) | | | (0.59 | %) | | | (0.81 | %) | | | (0.35 | %) |
Total expenses | | | 1.63 | % | | | 1.61 | % | | | 1.53 | % | | | 1.52 | % | | | 1.51 | % |
Portfolio turnover rate | | | 282 | % | | | 177 | % | | | 215 | % | | | 184 | % | | | 290 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
S&P 500® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for large-cap value securities on a daily basis. The Fund’s current benchmark is the S&P 500® Pure Value Index (the “underlying index”).
For the year ended March 31, 2020, S&P 500 Pure Value Fund H-Class returned -35.38%, compared with a return of -34.66% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
No sector contributed to the return of the underlying index for the period. The sectors detracting the most from return were Financials, Consumer Discretionary, and Energy.
The holdings contributing the most to the return of the underlying index for the period were Target Corp., Tyson Foods, Inc. — Class A, and PulteGroup, Inc. The holdings detracting the most from return were Macy’s, Inc., Kohl’s Corp., and Marathon Petroleum Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | September 1, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
Ten Largest Holdings (% of Total Net Assets) |
Berkshire Hathaway, Inc. — Class B | 3.6% |
Kroger Co. | 2.6% |
Centene Corp. | 2.1% |
Archer-Daniels-Midland Co. | 2.1% |
Westrock Co. | 1.9% |
AmerisourceBergen Corp. — Class A | 1.9% |
Ford Motor Co. | 1.9% |
General Motors Co. | 1.8% |
CVS Health Corp. | 1.8% |
MetLife, Inc. | 1.8% |
Top Ten Total | 21.5% |
“Ten Largest Holdings” excludes any temporary cash investments. |
18 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (35.38%) | (4.88%) | 4.49% |
A-Class Shares with sales charge‡ | (38.45%) | (5.80%) | 3.98% |
C-Class Shares | (35.87%) | (5.59%) | 3.71% |
C-Class Shares with CDSC§ | (36.50%) | (5.59%) | 3.71% |
H-Class Shares | (35.38%) | (4.88%) | 4.49% |
S&P 500 Pure Value Index | (34.66%) | (3.41%) | 6.51% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
S&P 500® PURE VALUE FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.8% |
| | | | | | | | | |
Financial - 34.5% |
Berkshire Hathaway, Inc. — Class B* | | | 1,660 | | | $ | 303,498 | |
MetLife, Inc. | | | 4,965 | | | | 151,780 | |
Prudential Financial, Inc. | | | 2,823 | | | | 147,191 | |
Unum Group | | | 8,913 | | | | 133,784 | |
Loews Corp. | | | 3,740 | | | | 130,264 | |
Lincoln National Corp. | | | 4,142 | | | | 109,017 | |
American International Group, Inc. | | | 4,062 | | | | 98,504 | |
Principal Financial Group, Inc. | | | 2,959 | | | | 92,735 | |
Invesco Ltd. | | | 10,140 | | | | 92,071 | |
Goldman Sachs Group, Inc. | | | 570 | | | | 88,116 | |
Allstate Corp. | | | 931 | | | | 85,401 | |
Assurant, Inc. | | | 794 | | | | 82,648 | |
People’s United Financial, Inc. | | | 7,416 | | | | 81,947 | |
Morgan Stanley | | | 2,313 | | | | 78,642 | |
Citizens Financial Group, Inc. | | | 3,989 | | | | 75,033 | |
Citigroup, Inc. | | | 1,779 | | | | 74,932 | |
Capital One Financial Corp. | | | 1,470 | | | | 74,117 | |
Travelers Companies, Inc. | | | 741 | | | | 73,618 | |
Everest Re Group Ltd. | | | 353 | | | | 67,924 | |
Chubb Ltd. | | | 530 | | | | 59,196 | |
Hartford Financial Services Group, Inc. | | | 1,656 | | | | 58,358 | |
Regions Financial Corp. | | | 6,495 | | | | 58,260 | |
Bank of New York Mellon Corp. | | | 1,723 | | | | 58,031 | |
State Street Corp. | | | 1,026 | | | | 54,655 | |
Aflac, Inc. | | | 1,505 | | | | 51,531 | |
Fifth Third Bancorp | | | 3,399 | | | | 50,475 | |
Bank of America Corp. | | | 2,340 | | | | 49,678 | |
Franklin Resources, Inc. | | | 2,880 | | | | 48,067 | |
Zions Bancorp North America | | | 1,711 | | | | 45,786 | |
KeyCorp | | | 4,030 | | | | 41,791 | |
Wells Fargo & Co. | | | 1,381 | | | | 39,635 | |
Globe Life, Inc. | | | 530 | | | | 38,144 | |
Raymond James Financial, Inc. | | | 596 | | | | 37,667 | |
M&T Bank Corp. | | | 330 | | | | 34,132 | |
Host Hotels & Resorts, Inc. REIT | | | 3,050 | | | | 33,672 | |
Huntington Bancshares, Inc. | | | 4,074 | | | | 33,448 | |
Truist Financial Corp. | | | 1,055 | | | | 32,536 | |
Comerica, Inc. | | | 950 | | | | 27,873 | |
Alliance Data Systems Corp. | | | 650 | | | | 21,873 | |
Total Financial | | | | | | | 2,916,030 | |
| | | | | | | | | |
Consumer, Non-cyclical - 22.0% |
Kroger Co. | | | 7,407 | | | | 223,099 | |
Centene Corp.* | | | 3,050 | | | | 181,200 | |
Archer-Daniels-Midland Co. | | | 5,041 | | | | 177,342 | |
AmerisourceBergen Corp. — Class A | | | 1,815 | | | | 160,627 | |
CVS Health Corp. | | | 2,609 | | | | 154,792 | |
Corteva, Inc. | | | 6,209 | | | | 145,912 | |
McKesson Corp. | | | 1,048 | | | | 141,752 | |
Mylan N.V.* | | | 9,483 | | | | 141,392 | |
Cigna Corp. | | | 740 | | | | 131,113 | |
Molson Coors Beverage Co. — Class B | | | 3,340 | | | | 130,294 | |
Perrigo Company plc | | | 1,740 | | | | 83,677 | |
JM Smucker Co. | | | 659 | | | | 73,149 | |
Anthem, Inc. | | | 270 | | | | 61,301 | |
Kraft Heinz Co. | | | 2,202 | | | | 54,477 | |
Total Consumer, Non-cyclical | | | | | | | 1,860,127 | |
| | | | | | | | | |
Consumer, Cyclical - 17.1% |
Ford Motor Co. | | | 32,854 | | | | 158,685 | |
General Motors Co. | | | 7,505 | | | | 155,954 | |
Walgreens Boots Alliance, Inc. | | | 2,754 | | | | 125,996 | |
Macy’s, Inc.1 | | | 23,253 | | | | 114,172 | |
Lennar Corp. — Class A | | | 2,327 | | | | 88,891 | |
Gap, Inc. | | | 12,229 | | | | 86,092 | |
Whirlpool Corp. | | | 899 | | | | 77,134 | |
American Airlines Group, Inc.1 | | | 5,734 | | | | 69,897 | |
Kohl’s Corp. | | | 4,762 | | | | 69,478 | |
Mohawk Industries, Inc.* | | | 850 | | | | 64,804 | |
L Brands, Inc. | | | 5,350 | | | | 61,846 | |
PVH Corp. | | | 1,537 | | | | 57,853 | |
Best Buy Company, Inc. | | | 905 | | | | 51,585 | |
BorgWarner, Inc. | | | 2,034 | | | | 49,569 | |
Nordstrom, Inc.1 | | | 3,060 | | | | 46,940 | |
United Airlines Holdings, Inc.*,1 | | | 1,410 | | | | 44,485 | |
Delta Air Lines, Inc. | | | 1,367 | | | | 39,001 | |
Carnival Corp. | | | 2,360 | | | | 31,081 | |
Alaska Air Group, Inc. | | | 1,068 | | | | 30,406 | |
Capri Holdings Ltd.* | | | 1,410 | | | | 15,214 | |
Norwegian Cruise Line Holdings Ltd.* | | | 948 | | | | 10,390 | |
Total Consumer, Cyclical | | | | | | | 1,449,473 | |
| | | | | | | | | |
Energy - 10.6% |
Baker Hughes Co. | | | 11,654 | | | | 122,367 | |
Marathon Petroleum Corp. | | | 4,781 | | | | 112,927 | |
Concho Resources, Inc. | | | 2,100 | | | | 89,985 | |
HollyFrontier Corp. | | | 3,630 | | | | 88,971 | |
Valero Energy Corp. | | | 1,935 | | | | 87,772 | |
Chevron Corp. | | | 684 | | | | 49,563 | |
Marathon Oil Corp. | | | 14,610 | | | | 48,067 | |
Exxon Mobil Corp. | | | 1,220 | | | | 46,323 | |
Diamondback Energy, Inc. | | | 1,630 | | | | 42,706 | |
Kinder Morgan, Inc. | | | 3,002 | | | | 41,788 | |
TechnipFMC plc | | | 5,971 | | | | 40,245 | |
Devon Energy Corp. | | | 5,360 | | | | 37,038 | |
Helmerich & Payne, Inc. | | | 2,316 | | | | 36,245 | |
Halliburton Co. | | | 3,878 | | | | 26,564 | |
Occidental Petroleum Corp. | | | 2,130 | | | | 24,665 | |
Total Energy | | | | | | | 895,226 | |
| | | | | | | | | |
Basic Materials - 5.4% |
Mosaic Co. | | | 11,120 | | | | 120,318 | |
DuPont de Nemours, Inc. | | | 2,779 | | | | 94,764 | |
Nucor Corp. | | | 2,069 | | | | 74,525 | |
Newmont Corp. | | | 1,560 | | | | 70,637 | |
International Paper Co. | | | 1,551 | | | | 48,283 | |
Eastman Chemical Co. | | | 940 | | | | 43,785 | |
Total Basic Materials | | | | | | | 452,312 | |
| | | | | | | | | |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
S&P 500® PURE VALUE FUND | |
| | Shares | | | Value | |
Industrial - 3.3% |
Westrock Co. | | | 5,758 | | | $ | 162,721 | |
FedEx Corp. | | | 530 | | | | 64,268 | |
Textron, Inc. | | | 2,079 | | | | 55,447 | |
Total Industrial | | | | | | | 282,436 | |
| | | | | | | | | |
Communications - 2.6% |
News Corp. — Class A | | | 9,829 | | | | 88,215 | |
AT&T, Inc. | | | 1,937 | | | | 56,464 | |
DISH Network Corp. — Class A* | | | 2,336 | | | | 46,697 | |
News Corp. — Class B | | | 3,078 | | | | 27,671 | |
Total Communications | | | | | | | 219,047 | |
| | | | | | | | | |
Technology - 2.3% |
Hewlett Packard Enterprise Co. | | | 9,126 | | | | 88,613 | |
HP, Inc. | | | 3,070 | | | | 53,295 | |
DXC Technology Co. | | | 3,971 | | | | 51,822 | |
Total Technology | | | | | | | 193,730 | |
| | | | | | | | | |
Utilities - 2.0% |
Exelon Corp. | | | 2,124 | | | | 78,184 | |
Duke Energy Corp. | | | 644 | | | | 52,087 | |
CenterPoint Energy, Inc. | | | 2,735 | | | | 42,256 | |
Total Utilities | | | | | | | 172,527 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $12,064,554) | | | | | | | 8,440,908 | |
| | Face
Amount | | | | |
REPURCHASE AGREEMENTS††,2 - 0.3% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 18,298 | | | | 18,298 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 7,037 | | | | 7,037 | |
Total Repurchase Agreements | | | | |
(Cost $25,335) | | | | | | | 25,335 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 2.4% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 203,849 | | | | 203,849 | |
Total Securities Lending Collateral | | | | |
(Cost $203,849) | | | | | | | 203,849 | |
| | | | | | | | | |
Total Investments - 102.5% | | | | |
(Cost $12,293,738) | | $ | 8,670,092 | |
Other Assets & Liabilities, net - (2.5)% | | | (211,283 | ) |
Total Net Assets - 100.0% | | $ | 8,458,809 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 8,440,908 | | | $ | — | | | $ | — | | | $ | 8,440,908 | |
Repurchase Agreements | | | — | | | | 25,335 | | | | — | | | | 25,335 | |
Securities Lending Collateral | | | 203,849 | | | | — | | | | — | | | | 203,849 | |
Total Assets | | $ | 8,644,757 | | | $ | 25,335 | | | $ | — | | | $ | 8,670,092 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $191,609 of securities loaned (cost $12,268,403) | | $ | 8,644,757 | |
Repurchase agreements, at value (cost $25,335) | | | 25,335 | |
Cash | | | 20,311 | |
Receivables: |
Dividends | | | 30,385 | |
Securities lending income | | | 61 | |
Fund shares sold | | | 18 | |
Total assets | | | 8,720,867 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 203,849 | |
Fund shares redeemed | | | 19,642 | |
Management fees | | | 7,842 | |
Transfer agent and administrative fees | | | 4,019 | |
Distribution and service fees | | | 3,501 | |
Portfolio accounting fees | | | 1,046 | |
Trustees’ fees* | | | 319 | |
Miscellaneous | | | 21,840 | |
Total liabilities | | | 262,058 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 8,458,809 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 17,623,549 | |
Total distributable earnings (loss) | | | (9,164,740 | ) |
Net assets | | $ | 8,458,809 | |
| | | | | |
A-Class: |
Net assets | | $ | 1,716,151 | |
Capital shares outstanding | | | 35,272 | |
Net asset value per share | | $ | 48.65 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 51.08 | |
| | | | | |
C-Class: |
Net assets | | $ | 1,320,764 | |
Capital shares outstanding | | | 32,131 | |
Net asset value per share | | $ | 41.11 | |
| | | | | |
H-Class: |
Net assets | | $ | 5,421,894 | |
Capital shares outstanding | | | 110,953 | |
Net asset value per share | | $ | 48.87 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 1,230,159 | |
Interest | | | 4,134 | |
Income from securities lending, net | | | 11,846 | |
Total investment income | | | 1,246,139 | |
| | | | | |
Expenses: |
Management fees | | | 328,805 | |
Distribution and service fees: |
A-Class | | | 7,923 | |
C-Class | | | 36,501 | |
H-Class | | | 92,554 | |
Transfer agent and administrative fees | | | 111,007 | |
Portfolio accounting fees | | | 43,840 | |
Registration fees | | | 43,410 | |
Professional fees | | | 19,388 | |
Trustees’ fees* | | | 11,231 | |
Pricing fees | | | 10,358 | |
Custodian fees | | | 6,501 | |
Line of credit fees | | | 15 | |
Miscellaneous | | | 29,752 | |
Total expenses | | | 741,285 | |
Net investment income | | | 504,854 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 1,699,354 | |
Net realized gain | | | 1,699,354 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (8,983,225 | ) |
Net change in unrealized appreciation (depreciation) | | | (8,983,225 | ) |
Net realized and unrealized loss | | | (7,283,871 | ) |
Net decrease in net assets resulting from operations | | $ | (6,779,017 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 504,854 | | | $ | 667,896 | |
Net realized gain on investments | | | 1,699,354 | | | | 526,450 | |
Net change in unrealized appreciation (depreciation) on investments | | | (8,983,225 | ) | | | (5,246,075 | ) |
Net decrease in net assets resulting from operations | | | (6,779,017 | ) | | | (4,051,729 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (35,656 | ) | | | (437,999 | ) |
C-Class | | | (34,327 | ) | | | (226,269 | ) |
H-Class | | | (345,333 | ) | | | (4,111,371 | ) |
Total distributions to shareholders | | | (415,316 | ) | | | (4,775,639 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 1,349,084 | | | | 7,532,490 | |
C-Class | | | 8,884,403 | | | | 20,662,832 | |
H-Class | | | 97,623,692 | | | | 110,771,594 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 34,706 | | | | 399,027 | |
C-Class | | | 32,664 | | | | 218,319 | |
H-Class | | | 344,762 | | | | 4,106,739 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (2,191,323 | ) | | | (9,948,084 | ) |
C-Class | | | (9,179,384 | ) | | | (22,301,020 | ) |
H-Class | | | (130,456,068 | ) | | | (123,104,778 | ) |
Net decrease from capital share transactions | | | (33,557,464 | ) | | | (11,662,881 | ) |
Net decrease in net assets | | | (40,751,797 | ) | | | (20,490,249 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 49,210,606 | | | | 69,700,855 | |
End of year | | $ | 8,458,809 | | | $ | 49,210,606 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 17,823 | | | | 87,067 | |
C-Class | | | 137,298 | | | | 291,103 | |
H-Class | | | 1,239,820 | | | | 1,375,940 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 428 | | | | 5,474 | |
C-Class | | | 475 | | | | 3,504 | |
H-Class | | | 4,229 | | | | 56,103 | |
Shares redeemed | | | | | | | | |
A-Class | | | (29,223 | ) | | | (119,480 | ) |
C-Class | | | (141,719 | ) | | | (314,385 | ) |
H-Class | | | (1,700,575 | ) | | | (1,575,202 | ) |
Net decrease in shares | | | (471,444 | ) | | | (189,876 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 76.07 | | | $ | 83.46 | | | $ | 76.42 | | | $ | 66.03 | | | $ | 72.54 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | 1.02 | | | | .85 | | | | .60 | | | | .55 | | | | .73 | |
Net gain (loss) on investments (realized and unrealized) | | | (27.62 | ) | | | (2.17 | ) | | | 7.41 | | | | 10.52 | | | | (4.63 | ) |
Total from investment operations | | | (26.60 | ) | | | (1.32 | ) | | | 8.01 | | | | 11.07 | | | | (3.90 | ) |
Less distributions from: |
Net investment income | | | (.82 | ) | | | (1.14 | ) | | | (.27 | ) | | | (.68 | ) | | | (.98 | ) |
Net realized gains | | | — | | | | (4.93 | ) | | | (.70 | ) | | | — | | | | (1.63 | ) |
Total distributions | | | (.82 | ) | | | (6.07 | ) | | | (.97 | ) | | | (.68 | ) | | | (2.61 | ) |
Net asset value, end of period | | $ | 48.65 | | | $ | 76.07 | | | $ | 83.46 | | | $ | 76.42 | | | $ | 66.03 | |
|
Total Returnb | | | (35.38 | %) | | | (1.26 | %) | | | 10.48 | % | | | 16.80 | % | | | (5.44 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,716 | | | $ | 3,518 | | | $ | 6,108 | | | $ | 6,686 | | | $ | 11,135 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.32 | % | | | 1.01 | % | | | 0.74 | % | | | 0.79 | % | | | 1.08 | % |
Total expenses | | | 1.63 | % | | | 1.61 | % | | | 1.53 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 254 | % | | | 190 | % | | | 252 | % | | | 321 | % | | | 365 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 64.87 | | | $ | 72.64 | | | $ | 67.13 | | | $ | 58.51 | | | $ | 65.08 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .17 | | | | .12 | | | | (.03 | ) | | | (.01 | ) | | | .17 | |
Net gain (loss) on investments (realized and unrealized) | | | (23.11 | ) | | | (1.82 | ) | | | 6.51 | | | | 9.31 | | | | (4.13 | ) |
Total from investment operations | | | (22.94 | ) | | | (1.70 | ) | | | 6.48 | | | | 9.30 | | | | (3.96 | ) |
Less distributions from: |
Net investment income | | | (.82 | ) | | | (1.14 | ) | | | (.27 | ) | | | (.68 | ) | | | (.98 | ) |
Net realized gains | | | — | | | | (4.93 | ) | | | (.70 | ) | | | — | | | | (1.63 | ) |
Total distributions | | | (.82 | ) | | | (6.07 | ) | | | (.97 | ) | | | (.68 | ) | | | (2.61 | ) |
Net asset value, end of period | | $ | 41.11 | | | $ | 64.87 | | | $ | 72.64 | | | $ | 67.13 | | | $ | 58.51 | |
|
Total Returnb | | | (35.87 | %) | | | (2.00 | %) | | | 9.66 | % | | | 15.94 | % | | | (6.15 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,321 | | | $ | 2,340 | | | $ | 4,058 | | | $ | 3,913 | | | $ | 3,550 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.26 | % | | | 0.17 | % | | | (0.05 | %) | | | (0.01 | %) | | | 0.28 | % |
Total expenses | | | 2.38 | % | | | 2.36 | % | | | 2.28 | % | | | 2.28 | % | | | 2.25 | % |
Portfolio turnover rate | | | 254 | % | | | 190 | % | | | 252 | % | | | 321 | % | | | 365 | % |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 76.39 | | | $ | 83.78 | | | $ | 76.71 | | | $ | 66.28 | | | $ | 72.81 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .96 | | | | .81 | | | | .57 | | | | .59 | | | | .80 | |
Net gain (loss) on investments (realized and unrealized) | | | (27.66 | ) | | | (2.13 | ) | | | 7.47 | | | | 10.52 | | | | (4.72 | ) |
Total from investment operations | | | (26.70 | ) | | | (1.32 | ) | | | 8.04 | | | | 11.11 | | | | (3.92 | ) |
Less distributions from: |
Net investment income | | | (.82 | ) | | | (1.14 | ) | | | (.27 | ) | | | (.68 | ) | | | (.98 | ) |
Net realized gains | | | — | | | | (4.93 | ) | | | (.70 | ) | | | — | | | | (1.63 | ) |
Total distributions | | | (.82 | ) | | | (6.07 | ) | | | (.97 | ) | | | (.68 | ) | | | (2.61 | ) |
Net asset value, end of period | | $ | 48.87 | | | $ | 76.39 | | | $ | 83.78 | | | $ | 76.71 | | | $ | 66.28 | |
|
Total Return | | | (35.38 | %) | | | (1.25 | %) | | | 10.48 | % | | | 16.81 | % | | | (5.44 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 5,422 | | | $ | 43,352 | | | $ | 59,536 | | | $ | 55,613 | | | $ | 70,983 | |
Ratios to average net assets: |
Net investment income (loss) | | | 1.22 | % | | | 0.97 | % | | | 0.70 | % | | | 0.83 | % | | | 1.17 | % |
Total expenses | | | 1.63 | % | | | 1.61 | % | | | 1.53 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 254 | % | | | 190 | % | | | 252 | % | | | 321 | % | | | 365 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Share split — Per share amounts for the periods presented through March 31, 2017 have been restated to reflect a 2:1 share split effective October 28, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
S&P MIDCAP 400® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for mid-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P MidCap 400® Pure Growth Index (the “underlying index”).
For the year ended March 31, 2020, S&P MidCap 400 Pure Growth Fund H-Class returned -26.38%, compared with a return of -25.57% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The only sector contributing to the return of the underlying index for the period was Real Estate. The sectors detracting the most from return were Consumer Discretionary, Energy and Information Technology.
The holdings contributing the most to the return of the underlying index for the period were Amedisys, Inc., Churchill Downs, Inc., and Cypress Semiconductor Corp. The holdings detracting the most from return were Mallinckrodt Plc, Matador Resources Co., and WPX Energy, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | September 1, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
Ten Largest Holdings (% of Total Net Assets) |
SolarEdge Technologies, Inc. | 2.6% |
Repligen Corp. | 2.5% |
Axon Enterprise, Inc. | 2.4% |
Generac Holdings, Inc. | 2.3% |
Mercury Systems, Inc. | 2.2% |
Penumbra, Inc. | 2.1% |
RenaissanceRe Holdings Ltd. | 1.9% |
FTI Consulting, Inc. | 1.8% |
Universal Display Corp. | 1.8% |
Cable One, Inc. | 1.8% |
Top Ten Total | 21.4% |
“Ten Largest Holdings” excludes any temporary cash investments. |
26 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (26.39%) | (3.91%) | 5.16% |
A-Class Shares with sales charge‡ | (29.89%) | (4.84%) | 4.65% |
C-Class Shares | (26.95%) | (4.63%) | 4.37% |
C-Class Shares with CDSC§ | (27.68%) | (4.63%) | 4.37% |
H-Class Shares | (26.38%) | (3.90%) | 5.16% |
S&P MidCap 400 Pure Growth Index | (25.57%) | (2.50%) | 6.61% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 27 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
S&P MIDCAP 400® PURE GROWTH FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.7% |
| | | | | | | | | |
Industrial - 26.5% |
Axon Enterprise, Inc.* | | | 12,390 | | | $ | 876,840 | |
Generac Holdings, Inc.* | | | 9,170 | | | | 854,369 | |
Mercury Systems, Inc.* | | | 11,020 | | | | 786,167 | |
Universal Display Corp. | | | 5,010 | | | | 660,218 | |
Trex Company, Inc.* | | | 7,080 | | | | 567,391 | |
Jabil, Inc. | | | 21,770 | | | | 535,107 | |
Carlisle Companies, Inc. | | | 4,240 | | | | 531,187 | |
Knight-Swift Transportation Holdings, Inc. | | | 15,490 | | | | 508,072 | |
MasTec, Inc.* | | | 14,950 | | | | 489,314 | |
Teledyne Technologies, Inc.* | | | 1,570 | | | | 466,714 | |
KBR, Inc. | | | 19,800 | | | | 409,464 | |
Tetra Tech, Inc. | | | 5,750 | | | | 406,065 | |
Hubbell, Inc. | | | 3,010 | | | | 345,367 | |
Timken Co. | | | 10,270 | | | | 332,132 | |
Coherent, Inc.* | | | 2,840 | | | | 302,205 | |
Cognex Corp. | | | 6,890 | | | | 290,896 | |
Woodward, Inc. | | | 4,460 | | | | 265,102 | |
Nordson Corp. | | | 1,860 | | | | 251,230 | |
Gentex Corp. | | | 9,990 | | | | 221,378 | |
Lincoln Electric Holdings, Inc. | | | 2,820 | | | | 194,580 | |
Clean Harbors, Inc.* | | | 3,660 | | | | 187,904 | |
Eagle Materials, Inc. | | | 2,730 | | | | 159,487 | |
Total Industrial | | | | | | | 9,641,189 | |
| | | | | | | | | |
Consumer, Non-cyclical - 23.0% |
Repligen Corp.* | | | 9,390 | | | | 906,511 | |
Penumbra, Inc.* | | | 4,790 | | | | 772,771 | |
FTI Consulting, Inc.* | | | 5,590 | | | | 669,514 | |
Exelixis, Inc.* | | | 32,140 | | | | 553,451 | |
Boston Beer Company, Inc. — Class A* | | | 1,420 | | | | 521,935 | |
Masimo Corp.* | | | 2,659 | | | | 470,962 | |
Arrowhead Pharmaceuticals, Inc.* | | | 14,610 | | | | 420,330 | |
Bio-Techne Corp. | | | 2,110 | | | | 400,098 | |
Ligand Pharmaceuticals, Inc. — Class B*,1 | | | 5,300 | | | | 385,416 | |
Amedisys, Inc.* | | | 2,060 | | | | 378,092 | |
PRA Health Sciences, Inc.* | | | 4,281 | | | | 355,494 | |
Syneos Health, Inc.* | | | 8,830 | | | | 348,079 | |
Chemed Corp. | | | 791 | | | | 342,661 | |
WEX, Inc.* | | | 3,070 | | | | 320,969 | |
Charles River Laboratories International, Inc.* | | | 2,360 | | | | 297,856 | |
West Pharmaceutical Services, Inc. | | | 1,880 | | | | 286,230 | |
ICU Medical, Inc.* | | | 1,360 | | | | 274,407 | |
Catalent, Inc.* | | | 4,900 | | | | 254,555 | |
Sanderson Farms, Inc. | | | 1,960 | | | | 241,707 | |
Brink’s Co. | | | 2,950 | | | | 153,547 | |
Total Consumer, Non-cyclical | | | | | | | 8,354,585 | |
| | | | | | | | | |
Consumer, Cyclical - 16.9% |
Domino’s Pizza, Inc. | | | 1,849 | | | | 599,205 | |
RH* | | | 5,010 | | | | 503,355 | |
Casey’s General Stores, Inc. | | | 3,730 | | | | 494,188 | |
Scotts Miracle-Gro Co. — Class A | | | 4,780 | | | | 489,472 | |
Caesars Entertainment Corp.* | | | 56,680 | | | | 383,157 | |
Dunkin’ Brands Group, Inc. | | | 7,100 | | | | 377,010 | |
Five Below, Inc.* | | | 5,280 | | | | 371,606 | |
Skechers U.S.A., Inc. — Class A* | | | 15,050 | | | | 357,287 | |
Pool Corp. | | | 1,597 | | | | 314,242 | |
Marriott Vacations Worldwide Corp. | | | 5,521 | | | | 306,857 | |
Churchill Downs, Inc. | | | 2,721 | | | | 280,127 | |
Deckers Outdoor Corp.* | | | 1,930 | | | | 258,620 | |
Scientific Games Corp. — Class A* | | | 22,795 | | | | 221,111 | |
Toro Co. | | | 3,270 | | | | 212,844 | |
Boyd Gaming Corp. | | | 13,220 | | | | 190,633 | |
Eldorado Resorts, Inc.*,1 | | | 11,974 | | | | 172,426 | |
Wyndham Hotels & Resorts, Inc. | | | 5,218 | | | | 164,419 | |
Herman Miller, Inc. | | | 6,860 | | | | 152,292 | |
Polaris, Inc. | | | 3,020 | | | | 145,413 | |
Tempur Sealy International, Inc.* | | | 3,220 | | | | 140,746 | |
Total Consumer, Cyclical | | | | | | | 6,135,010 | |
| | | | | | | | | |
Technology - 16.7% |
Teradyne, Inc. | | | 11,660 | | | | 631,622 | |
Cabot Microelectronics Corp. | | | 5,290 | | | | 603,801 | |
Lumentum Holdings, Inc.* | | | 8,170 | | | | 602,129 | |
Tyler Technologies, Inc.* | | | 1,950 | | | | 578,292 | |
MKS Instruments, Inc. | | | 7,050 | | | | 574,222 | |
Fair Isaac Corp.* | | | 1,721 | | | | 529,534 | |
Cypress Semiconductor Corp. | | | 22,120 | | | | 515,838 | |
j2 Global, Inc. | | | 6,241 | | | | 467,139 | |
Monolithic Power Systems, Inc. | | | 2,760 | | | | 462,190 | |
CACI International, Inc. — Class A* | | | 1,990 | | | | 420,189 | |
Perspecta, Inc. | | | 16,280 | | | | 296,947 | |
Manhattan Associates, Inc.* | | | 4,340 | | | | 216,219 | |
ACI Worldwide, Inc.* | | | 6,846 | | | | 165,331 | |
Total Technology | | | | | | | 6,063,453 | |
| | | | | | | | | |
Financial - 6.9% |
RenaissanceRe Holdings Ltd. | | | 4,740 | | | | 707,777 | |
LendingTree, Inc.*,1 | | | 2,780 | | | | 509,824 | |
Cousins Properties, Inc. REIT | | | 16,370 | | | | 479,150 | |
Brown & Brown, Inc. | | | 10,110 | | | | 366,184 | |
Primerica, Inc. | | | 3,061 | | | | 270,837 | |
EastGroup Properties, Inc. REIT | | | 1,800 | | | | 188,064 | |
Total Financial | | | | | | | 2,521,836 | |
| | | | | | | | | |
Energy - 5.1% |
SolarEdge Technologies, Inc.* | | | 11,430 | | | | 935,889 | |
Murphy USA, Inc.* | | | 6,400 | | | | 539,904 | |
WPX Energy, Inc.* | | | 73,100 | | | | 222,955 | |
Matador Resources Co.*,1 | | | 59,950 | | | | 148,676 | |
Total Energy | | | | | | | 1,847,424 | |
| | | | | | | | | |
Communications - 2.6% |
Cable One, Inc. | | | 390 | | | | 641,164 | |
Etsy, Inc.* | | | 7,530 | | | | 289,453 | |
Total Communications | | | | | | | 930,617 | |
28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
S&P MIDCAP 400® PURE GROWTH FUND | |
| | Shares | | | Value | |
Basic Materials - 2.0% |
Reliance Steel & Aluminum Co. | | | 5,480 | | | $ | 479,993 | |
Royal Gold, Inc. | | | 2,920 | | | | 256,113 | |
Total Basic Materials | | | | | | | 736,106 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $43,108,316) | | | | | | | 36,230,220 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.3% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 90,593 | | | | 90,593 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 34,843 | | | | 34,843 | |
Total Repurchase Agreements | | | | |
(Cost $125,436) | | | | | | | 125,436 | |
| | Shares | | | | |
SECURITIES LENDING COLLATERAL†,3 - 2.2% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 809,443 | | | | 809,443 | |
Total Securities Lending Collateral | | | | |
(Cost $809,443) | | | | | | | 809,443 | |
| | | | | | | | | |
Total Investments - 102.2% | | | | |
(Cost $44,043,195) | | $ | 37,165,099 | |
Other Assets & Liabilities, net - (2.2)% | | | (804,853 | ) |
Total Net Assets - 100.0% | | $ | 36,360,246 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 36,230,220 | | | $ | — | | | $ | — | | | $ | 36,230,220 | |
Repurchase Agreements | | | — | | | | 125,436 | | | | — | | | | 125,436 | |
Securities Lending Collateral | | | 809,443 | | | | — | | | | — | | | | 809,443 | |
Total Assets | | $ | 37,039,663 | | | $ | 125,436 | | | $ | — | | | $ | 37,165,099 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
S&P MIDCAP 400® PURE GROWTH FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $803,754 of securities loaned (cost $43,917,759) | | $ | 37,039,663 | |
Repurchase agreements, at value (cost $125,436) | | | 125,436 | |
Cash | | | 101,992 | |
Receivables: |
Securities sold | | | 1,451,552 | |
Fund shares sold | | | 35,324 | |
Dividends | | | 13,061 | |
Securities lending income | | | 271 | |
Total assets | | | 38,767,299 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 1,503,571 | |
Return of securities lending collateral | | | 809,443 | |
Management fees | | | 21,175 | |
Distribution and service fees | | | 9,702 | |
Transfer agent and administrative fees | | | 9,055 | |
Portfolio accounting fees | | | 2,823 | |
Trustees’ fees* | | | 766 | |
Miscellaneous | | | 50,518 | |
Total liabilities | | | 2,407,053 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 36,360,246 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 47,941,133 | |
Total distributable earnings (loss) | | | (11,580,887 | ) |
Net assets | | $ | 36,360,246 | |
| | | | | |
A-Class: |
Net assets | | $ | 4,556,239 | |
Capital shares outstanding | | | 134,916 | |
Net asset value per share | | $ | 33.77 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 35.45 | |
| | | | | |
C-Class: |
Net assets | | $ | 3,956,460 | |
Capital shares outstanding | | | 140,453 | |
Net asset value per share | | $ | 28.17 | |
| | | | | |
H-Class: |
Net assets | | $ | 27,847,547 | |
Capital shares outstanding | | | 823,489 | |
Net asset value per share | | $ | 33.82 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 464,740 | |
Interest | | | 4,997 | |
Income from securities lending, net | | | 2,436 | |
Total investment income | | | 472,173 | |
| | | | | |
Expenses: |
Management fees | | | 387,060 | |
Distribution and service fees: |
A-Class | | | 20,594 | |
C-Class | | | 66,031 | |
H-Class | | | 91,918 | |
Transfer agent and administrative fees | | | 131,016 | |
Registration fees | | | 52,790 | |
Portfolio accounting fees | | | 51,608 | |
Professional fees | | | 24,048 | |
Trustees’ fees* | | | 13,651 | |
Custodian fees | | | 7,443 | |
Line of credit fees | | | 66 | |
Miscellaneous | | | 43,655 | |
Total expenses | | | 889,880 | |
Net investment loss | | | (417,707 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 6,126,223 | |
Net realized gain | | | 6,126,223 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (18,577,132 | ) |
Net change in unrealized appreciation (depreciation) | | | (18,577,132 | ) |
Net realized and unrealized loss | | | (12,450,909 | ) |
Net decrease in net assets resulting from operations | | $ | (12,868,616 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE GROWTH FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (417,707 | ) | | $ | (625,735 | ) |
Net realized gain (loss) on investments | | | 6,126,223 | | | | (3,143,761 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (18,577,132 | ) | | | (123,715 | ) |
Net decrease in net assets resulting from operations | | | (12,868,616 | ) | | | (3,893,211 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | — | | | | (1,480,551 | ) |
C-Class | | | — | | | | (1,352,505 | ) |
H-Class | | | — | | | | (6,205,701 | ) |
Total distributions to shareholders | | | — | | | | (9,038,757 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 2,320,669 | | | | 9,908,515 | |
C-Class | | | 734,313 | | | | 1,179,771 | |
H-Class | | | 57,910,692 | | | | 88,802,650 | |
Distributions reinvested | | | | | | | | |
A-Class | | | — | | | | 1,446,877 | |
C-Class | | | — | | | | 1,337,378 | |
H-Class | | | — | | | | 6,125,144 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (6,586,092 | ) | | | (9,974,936 | ) |
C-Class | | | (3,685,518 | ) | | | (6,073,902 | ) |
H-Class | | | (68,683,226 | ) | | | (111,688,160 | ) |
Net decrease from capital share transactions | | | (17,989,162 | ) | | | (18,936,663 | ) |
Net decrease in net assets | | | (30,857,778 | ) | | | (31,868,631 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 67,218,024 | | | | 99,086,655 | |
End of year | | $ | 36,360,246 | | | $ | 67,218,024 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 52,212 | | | | 188,628 | |
C-Class | | | 19,823 | | | | 26,086 | |
H-Class | | | 1,345,912 | | | | 1,713,618 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | — | | | | 33,431 | |
C-Class | | | — | | | | 36,691 | |
H-Class | | | — | | | | 141,328 | |
Shares redeemed | | | | | | | | |
A-Class | | | (150,079 | ) | | | (195,357 | ) |
C-Class | | | (102,639 | ) | | | (134,221 | ) |
H-Class | | | (1,565,661 | ) | | | (2,151,342 | ) |
Net decrease in shares | | | (400,432 | ) | | | (341,138 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
S&P MIDCAP 400® PURE GROWTH FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 45.88 | | | $ | 54.96 | | | $ | 50.84 | | | $ | 46.51 | | | $ | 53.86 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.32 | ) | | | (.30 | ) | | | (.41 | ) | | | (.34 | ) | | | (.36 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (11.79 | ) | | | (2.39 | ) | | | 8.09 | | | | 5.41 | | | | (4.48 | ) |
Total from investment operations | | | (12.11 | ) | | | (2.69 | ) | | | 7.68 | | | | 5.07 | | | | (4.84 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (6.39 | ) | | | (3.56 | ) | | | (.74 | ) | | | (2.51 | ) |
Total distributions | | | — | | | | (6.39 | ) | | | (3.56 | ) | | | (.74 | ) | | | (2.51 | ) |
Net asset value, end of period | | $ | 33.77 | | | $ | 45.88 | | | $ | 54.96 | | | $ | 50.84 | | | $ | 46.51 | |
|
Total Returnb | | | (26.39 | %) | | | (4.19 | %) | | | 15.33 | % | | | 10.98 | % | | | (9.23 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 4,556 | | | $ | 10,681 | | | $ | 11,327 | | | $ | 16,269 | | | $ | 29,017 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.72 | %) | | | (0.59 | %) | | | (0.77 | %) | | | (0.71 | %) | | | (0.71 | %) |
Total expenses | | | 1.63 | % | | | 1.62 | % | | | 1.53 | % | | | 1.52 | % | | | 1.50 | % |
Portfolio turnover rate | | | 190 | % | | | 165 | % | | | 160 | % | | | 127 | % | | | 143 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 38.56 | | | $ | 47.66 | | | $ | 44.83 | | | $ | 41.41 | | | $ | 48.60 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.54 | ) | | | (.62 | ) | | | (.71 | ) | | | (.61 | ) | | | (.66 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (9.85 | ) | | | (2.09 | ) | | | 7.10 | | | | 4.77 | | | | (4.02 | ) |
Total from investment operations | | | (10.39 | ) | | | (2.71 | ) | | | 6.39 | | | | 4.16 | | | | (4.68 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (6.39 | ) | | | (3.56 | ) | | | (.74 | ) | | | (2.51 | ) |
Total distributions | | | — | | | | (6.39 | ) | | | (3.56 | ) | | | (.74 | ) | | | (2.51 | ) |
Net asset value, end of period | | $ | 28.17 | | | $ | 38.56 | | | $ | 47.66 | | | $ | 44.83 | | | $ | 41.41 | |
|
Total Returnb | | | (26.95 | %) | | | (4.90 | %) | | | 14.47 | % | | | 10.16 | % | | | (9.92 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 3,956 | | | $ | 8,609 | | | $ | 14,046 | | | $ | 15,049 | | | $ | 20,279 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.47 | %) | | | (1.37 | %) | | | (1.49 | %) | | | (1.44 | %) | | | (1.46 | %) |
Total expenses | | | 2.38 | % | | | 2.36 | % | | | 2.28 | % | | | 2.27 | % | | | 2.25 | % |
Portfolio turnover rate | | | 190 | % | | | 165 | % | | | 160 | % | | | 127 | % | | | 143 | % |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE GROWTH FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 45.94 | | | $ | 55.03 | | | $ | 50.89 | | | $ | 46.56 | | | $ | 53.91 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.31 | ) | | | (.34 | ) | | | (.40 | ) | | | (.33 | ) | | | (.36 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (11.81 | ) | | | (2.36 | ) | | | 8.10 | | | | 5.40 | | | | (4.48 | ) |
Total from investment operations | | | (12.12 | ) | | | (2.70 | ) | | | 7.70 | | | | 5.07 | | | | (4.84 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (6.39 | ) | | | (3.56 | ) | | | (.74 | ) | | | (2.51 | ) |
Total distributions | | | — | | | | (6.39 | ) | | | (3.56 | ) | | | (.74 | ) | | | (2.51 | ) |
Net asset value, end of period | | $ | 33.82 | | | $ | 45.94 | | | $ | 55.03 | | | $ | 50.89 | | | $ | 46.56 | |
|
Total Return | | | (26.38 | %) | | | (4.19 | %) | | | 15.32 | % | | | 10.99 | % | | | (9.22 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 27,848 | | | $ | 47,929 | | | $ | 73,714 | | | $ | 78,373 | | | $ | 94,915 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.71 | %) | | | (0.64 | %) | | | (0.74 | %) | | | (0.68 | %) | | | (0.71 | %) |
Total expenses | | | 1.63 | % | | | 1.61 | % | | | 1.53 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 190 | % | | | 165 | % | | | 160 | % | | | 127 | % | | | 143 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
S&P MIDCAP 400® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for mid-cap value securities on a daily basis. The Fund’s current benchmark is the S&P MidCap 400® Pure Value Index (the “underlying index”).
For the year ended March 31, 2020, S&P MidCap 400 Pure Value Fund H-Class returned -40.86%, compared with a return of -39.51% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The only sector contributing to the return of the underlying index for the period was Consumer Staples. The sectors detracting the most from return were Consumer Discretionary, Industrials, and Financials.
The holdings contributing the most to the return of the underlying index for the period were KB Home, Legg Mason, Inc., and Jabil, Inc. The holdings detracting the most from return were Resideo Technologies, Inc., Chesapeake Energy Corp., and PBF Energy, Inc. Class A.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | September 1, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
Ten Largest Holdings (% of Total Net Assets) |
Genworth Financial, Inc. — Class A | 3.5% |
Tech Data Corp. | 2.6% |
Telephone & Data Systems, Inc. | 2.2% |
Brighthouse Financial, Inc. | 2.2% |
Avnet, Inc. | 2.2% |
Patterson Companies, Inc. | 2.1% |
United States Steel Corp. | 2.1% |
CNX Resources Corp. | 2.1% |
Dillard’s, Inc. — Class A | 2.0% |
Resideo Technologies, Inc. | 2.0% |
Top Ten Total | 23.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
34 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (40.86%) | (6.76%) | 1.51% |
A-Class Shares with sales charge‡ | (43.66%) | (7.66%) | 1.02% |
C-Class Shares | (41.32%) | (7.46%) | 0.75% |
C-Class Shares with CDSC§ | (41.90%) | (7.46%) | 0.75% |
H-Class Shares | (40.86%) | (6.76%) | 1.50% |
S&P MidCap 400 Pure Value Index | (39.51%) | (4.87%) | 3.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 35 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
S&P MIDCAP 400® PURE VALUE FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.5% |
| | | | | | | | | |
Financial - 28.8% |
Genworth Financial, Inc. — Class A* | | | 32,139 | | | $ | 106,701 | |
Brighthouse Financial, Inc.* | | | 2,768 | | | | 66,903 | |
Legg Mason, Inc. | | | 1,203 | | | | 58,767 | |
CNO Financial Group, Inc. | | | 4,510 | | | | 55,879 | |
Jefferies Financial Group, Inc. | | | 2,991 | | | | 40,887 | |
Kemper Corp. | | | 535 | | | | 39,788 | |
Reinsurance Group of America, Inc. — Class A | | | 432 | | | | 36,348 | |
GEO Group, Inc. REIT | | | 2,940 | | | | 35,750 | |
Mercury General Corp. | | | 838 | | | | 34,123 | |
Umpqua Holdings Corp. | | | 3,033 | | | | 33,060 | |
CoreCivic, Inc. REIT | | | 2,730 | | | | 30,494 | |
Old Republic International Corp. | | | 1,994 | | | | 30,409 | |
FNB Corp. | | | 4,024 | | | | 29,657 | |
Associated Banc-Corp. | | | 2,033 | | | | 26,002 | |
Janus Henderson Group plc | | | 1,649 | | | | 25,263 | |
Navient Corp. | | | 3,080 | | | | 23,346 | |
Bank OZK | | | 1,305 | | | | 21,793 | |
PacWest Bancorp | | | 1,165 | | | | 20,877 | |
Diversified Healthcare Trust REIT | | | 5,617 | | | | 20,390 | |
Sterling Bancorp | | | 1,896 | | | | 19,813 | |
Hancock Whitney Corp. | | | 838 | | | | 16,358 | |
Pinnacle Financial Partners, Inc. | | | 428 | | | | 16,067 | |
Valley National Bancorp | | | 2,177 | | | | 15,914 | |
Park Hotels & Resorts, Inc. REIT | | | 2,004 | | | | 15,852 | |
First Horizon National Corp. | | | 1,869 | | | | 15,064 | |
Wintrust Financial Corp. | | | 435 | | | | 14,294 | |
Pebblebrook Hotel Trust REIT | | | 1,207 | | | | 13,144 | |
TCF Financial Corp. | | | 531 | | | | 12,032 | |
Texas Capital Bancshares, Inc.* | | | 482 | | | | 10,686 | |
Total Financial | | | | | | | 885,661 | |
| | | | | | | | | |
Consumer, Cyclical - 25.1% |
Dillard’s, Inc. — Class A1 | | | 1,646 | | | | 60,820 | |
Resideo Technologies, Inc.* | | | 12,514 | | | | 60,568 | |
World Fuel Services Corp. | | | 2,127 | | | | 53,558 | |
BJ’s Wholesale Club Holdings, Inc.* | | | 2,073 | | | | 52,799 | |
AutoNation, Inc.* | | | 1,831 | | | | 51,378 | |
Goodyear Tire & Rubber Co. | | | 8,579 | | | | 49,930 | |
Lear Corp. | | | 563 | | | | 45,744 | |
Dana, Inc. | | | 5,647 | | | | 44,103 | |
Delphi Technologies plc* | | | 5,447 | | | | 43,848 | |
TRI Pointe Group, Inc.* | | | 4,027 | | | | 35,317 | |
Thor Industries, Inc. | | | 796 | | | | 33,575 | |
Taylor Morrison Home Corp. — Class A* | | | 3,008 | | | | 33,088 | |
Penn National Gaming, Inc.* | | | 2,251 | | | | 28,475 | |
Foot Locker, Inc. | | | 1,229 | | | | 27,100 | |
JetBlue Airways Corp.* | | | 2,986 | | | | 26,725 | |
Adient plc* | | | 2,879 | | | | 26,112 | |
KAR Auction Services, Inc. | | | 1,844 | | | | 22,128 | |
Urban Outfitters, Inc.* | | | 1,442 | | | | 20,534 | |
American Eagle Outfitters, Inc. | | | 2,479 | | | | 19,708 | |
Dick’s Sporting Goods, Inc. | | | 924 | | | | 19,644 | |
Bed Bath & Beyond, Inc.1 | | | 3,772 | | | | 15,880 | |
Total Consumer, Cyclical | | | | | | | 771,034 | |
| | | | | | | | | |
Industrial - 17.4% |
Tech Data Corp.* | | | 605 | | | | 79,165 | |
Avnet, Inc. | | | 2,641 | | | | 66,289 | |
Arrow Electronics, Inc.* | | | 1,037 | | | | 53,789 | |
Ryder System, Inc. | | | 2,034 | | | | 53,779 | |
SYNNEX Corp. | | | 691 | | | | 50,512 | |
AECOM* | | | 1,393 | | | | 41,581 | |
Greif, Inc. — Class A | | | 1,129 | | | | 35,101 | |
Trinity Industries, Inc. | | | 1,717 | | | | 27,592 | |
Terex Corp. | | | 1,754 | | | | 25,187 | |
II-VI, Inc.* | | | 848 | | | | 24,168 | |
Dycom Industries, Inc.* | | | 921 | | | | 23,624 | |
Regal Beloit Corp. | | | 361 | | | | 22,725 | |
XPO Logistics, Inc.* | | | 334 | | | | 16,282 | |
Worthington Industries, Inc. | | | 561 | | | | 14,726 | |
Total Industrial | | | | | | | 534,520 | |
| | | | | | | | | |
Consumer, Non-cyclical - 9.7% |
Patterson Companies, Inc. | | | 4,311 | | | | 65,915 | |
ManpowerGroup, Inc. | | | 869 | | | | 46,049 | |
TreeHouse Foods, Inc.* | | | 802 | | | | 35,408 | |
Sprouts Farmers Market, Inc.* | | | 1,611 | | | | 29,949 | |
Molina Healthcare, Inc.* | | | 201 | | | | 28,082 | |
Avis Budget Group, Inc.* | | | 1,921 | | | | 26,702 | |
Graham Holdings Co. — Class B | | | 66 | | | | 22,517 | |
Adtalem Global Education, Inc.* | | | 719 | | | | 19,262 | |
Acadia Healthcare Company, Inc.* | | | 797 | | | | 14,625 | |
Tenet Healthcare Corp.* | | | 796 | | | | 11,462 | |
Total Consumer, Non-cyclical | | | | | | | 299,971 | |
| | | | | | | | | |
Basic Materials - 8.6% |
United States Steel Corp.1 | | | 10,312 | | | | 65,069 | |
Domtar Corp. | | | 2,605 | | | | 56,372 | |
Olin Corp. | | | 4,594 | | | | 53,612 | |
Commercial Metals Co. | | | 2,890 | | | | 45,633 | |
Minerals Technologies, Inc. | | | 608 | | | | 22,046 | |
Chemours Co. | | | 2,310 | | | | 20,490 | |
Total Basic Materials | | | | | | | 263,222 | |
| | | | | | | | | |
Energy - 6.3% |
CNX Resources Corp.* | | | 12,218 | | | | 65,000 | |
NOW, Inc.* | | | 8,535 | | | | 44,041 | |
Equities Corp. | | | 5,976 | | | | 42,250 | |
PBF Energy, Inc. — Class A | | | 3,056 | | | | 21,636 | |
Antero Midstream Corp. | | | 6,181 | | | | 12,980 | |
Patterson-UTI Energy, Inc. | | | 3,877 | | | | 9,111 | |
Total Energy | | | | | | | 195,018 | |
| | | | | | | | | |
Communications - 2.7% |
Telephone & Data Systems, Inc. | | | 4,064 | | | | 68,113 | |
Meredith Corp. | | | 1,220 | | | | 14,908 | |
Total Communications | | | | | | | 83,021 | |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
S&P MIDCAP 400® PURE VALUE FUND | |
| | Shares | | | Value | |
Technology - 0.9% |
NetScout Systems, Inc.* | | | 1,157 | | | $ | 27,386 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $3,908,286) | | | | | | | 3,059,833 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.2% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 3,669 | | | | 3,669 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 1,411 | | | | 1,411 | |
Total Repurchase Agreements | | | | |
(Cost $5,080) | | | | | | | 5,080 | |
| | Shares | | | | |
SECURITIES LENDING COLLATERAL†,3 - 3.4% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 105,657 | | | | 105,657 | |
Total Securities Lending Collateral | | | | |
(Cost $105,657) | | | | | | | 105,657 | |
| | | | | | | | | |
Total Investments - 103.1% | | | | |
(Cost $4,019,023) | | $ | 3,170,570 | |
Other Assets & Liabilities, net - (3.1)% | | | (94,446 | ) |
Total Net Assets - 100.0% | | $ | 3,076,124 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 3,059,833 | | | $ | — | | | $ | — | | | $ | 3,059,833 | |
Repurchase Agreements | | | — | | | | 5,080 | | | | — | | | | 5,080 | |
Securities Lending Collateral | | | 105,657 | | | | — | | | | — | | | | 105,657 | |
Total Assets | | $ | 3,165,490 | | | $ | 5,080 | | | $ | — | | | $ | 3,170,570 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
S&P MIDCAP 400® PURE VALUE FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $101,082 of securities loaned (cost $4,013,943) | | $ | 3,165,490 | |
Repurchase agreements, at value (cost $5,080) | | | 5,080 | |
Cash | | | 4,073 | |
Receivables: |
Securities sold | | | 36,108 | |
Dividends | | | 5,590 | |
Securities lending income | | | 138 | |
Total assets | | | 3,216,479 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 105,657 | |
Fund shares redeemed | | | 25,232 | |
Management fees | | | 1,940 | |
Distribution and service fees | | | 1,056 | |
Transfer agent and administrative fees | | | 933 | |
Portfolio accounting fees | | | 258 | |
Trustees’ fees* | | | 73 | |
Miscellaneous | | | 5,206 | |
Total liabilities | | | 140,355 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 3,076,124 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 6,777,419 | |
Total distributable earnings (loss) | | | (3,701,295 | ) |
Net assets | | $ | 3,076,124 | |
| | | | | |
A-Class: |
Net assets | | $ | 749,425 | |
Capital shares outstanding | | | 24,549 | |
Net asset value per share | | $ | 30.53 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 32.05 | |
| | | | | |
C-Class: |
Net assets | | $ | 708,211 | |
Capital shares outstanding | | | 26,634 | |
Net asset value per share | | $ | 26.59 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,618,488 | |
Capital shares outstanding | | | 53,104 | |
Net asset value per share | | $ | 30.48 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 275,447 | |
Interest | | | 1,636 | |
Income from securities lending, net | | | 20,577 | |
Total investment income | | | 297,660 | |
| | | | | |
Expenses: |
Management fees | | | 108,161 | |
Distribution and service fees: |
A-Class | | | 2,948 | |
C-Class | | | 11,902 | |
H-Class | | | 30,130 | |
Transfer agent and administrative fees | | | 36,340 | |
Portfolio accounting fees | | | 14,421 | |
Registration fees | | | 13,249 | |
Professional fees | | | 7,809 | |
Printing fees | | | 4,805 | |
Trustees’ fees* | | | 3,627 | |
Custodian fees | | | 2,074 | |
Line of credit fees | | | 19 | |
Miscellaneous | | | 8,686 | |
Total expenses | | | 244,171 | |
Net investment income | | | 53,489 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 93,505 | |
Net realized gain | | | 93,505 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (2,510,628 | ) |
Net change in unrealized appreciation (depreciation) | | | (2,510,628 | ) |
Net realized and unrealized loss | | | (2,417,123 | ) |
Net decrease in net assets resulting from operations | | $ | (2,363,634 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE VALUE FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income (loss) | | $ | 53,489 | | | $ | (29,720 | ) |
Net realized gain (loss) on investments | | | 93,505 | | | | (308,470 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (2,510,628 | ) | | | 150,200 | |
Net decrease in net assets resulting from operations | | | (2,363,634 | ) | | | (187,990 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | — | | | | (45,986 | ) |
C-Class | | | — | | | | (43,988 | ) |
H-Class | | | — | | | | (196,579 | ) |
Total distributions to shareholders | | | — | | | | (286,553 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 2,888,368 | | | | 3,525,367 | |
C-Class | | | 801,208 | | | | 2,050,559 | |
H-Class | | | 151,848,364 | | | | 66,894,202 | |
Distributions reinvested | | | | | | | | |
A-Class | | | — | | | | 33,094 | |
C-Class | | | — | | | | 43,697 | |
H-Class | | | — | | | | 195,599 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (2,875,817 | ) | | | (3,336,488 | ) |
C-Class | | | (1,579,032 | ) | | | (2,030,965 | ) |
H-Class | | | (159,616,730 | ) | | | (63,758,018 | ) |
Net increase (decrease) from capital share transactions | | | (8,533,639 | ) | | | 3,617,047 | |
Net increase (decrease) in net assets | | | (10,897,273 | ) | | | 3,142,504 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 13,973,397 | | | | 10,830,893 | |
End of year | | $ | 3,076,124 | | | $ | 13,973,397 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 56,905 | | | | 64,344 | |
C-Class | | | 22,021 | | | | 43,351 | |
H-Class | | | 2,970,212 | | | | 1,255,133 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | — | | | | 691 | |
C-Class | | | — | | | | 1,038 | |
H-Class | | | — | | | | 4,094 | |
Shares redeemed | | | | | | | | |
A-Class | | | (55,665 | ) | | | (62,058 | ) |
C-Class | | | (36,039 | ) | | | (42,998 | ) |
H-Class | | | (3,129,154 | ) | | | (1,195,323 | ) |
Net increase (decrease) in shares | | | (171,720 | ) | | | 68,272 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
S&P MIDCAP 400® PURE VALUE FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 51.62 | | | $ | 53.32 | | | $ | 51.39 | | | $ | 42.43 | | | $ | 45.68 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .34 | | | | (.04 | ) | | | .02 | | | | (.08 | ) | | | .16 | |
Net gain (loss) on investments (realized and unrealized) | | | (21.43 | ) | | | (.17 | ) | | | 2.89 | | | | 9.14 | | | | (3.30 | ) |
Total from investment operations | | | (21.09 | ) | | | (.21 | ) | | | 2.91 | | | | 9.06 | | | | (3.14 | ) |
Less distributions from: |
Net investment income | | | — | | | | (.02 | ) | | | — | | | | (.10 | ) | | | (.11 | ) |
Net realized gains | | | — | | | | (1.47 | ) | | | (.98 | ) | | | — | | | | — | |
Total distributions | | | — | | | | (1.49 | ) | | | (.98 | ) | | | (.10 | ) | | | (.11 | ) |
Net asset value, end of period | | $ | 30.53 | | | $ | 51.62 | | | $ | 53.32 | | | $ | 51.39 | | | $ | 42.43 | |
|
Total Returnb | | | (40.86 | %) | | | (0.16 | %) | | | 5.63 | % | | | 21.34 | % | | | (6.88 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 749 | | | $ | 1,203 | | | $ | 1,084 | | | $ | 2,957 | | | $ | 4,775 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.68 | % | | | (0.07 | %) | | | 0.03 | % | | | (0.17 | %) | | | 0.39 | % |
Total expenses | | | 1.63 | % | | | 1.62 | % | | | 1.54 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 993 | % | | | 558 | % | | | 506 | % | | | 628 | % | | | 493 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 45.31 | | | $ | 47.35 | | | $ | 46.08 | | | $ | 38.33 | | | $ | 41.59 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.05 | ) | | | (.41 | ) | | | (.29 | ) | | | (.36 | ) | | | (.12 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (18.67 | ) | | | (.14 | ) | | | 2.54 | | | | 8.21 | | | | (3.03 | ) |
Total from investment operations | | | (18.72 | ) | | | (.55 | ) | | | 2.25 | | | | 7.85 | | | | (3.15 | ) |
Less distributions from: |
Net investment income | | | — | | | | (.02 | ) | | | — | | | | (.10 | ) | | | (.11 | ) |
Net realized gains | | | — | | | | (1.47 | ) | | | (.98 | ) | | | — | | | | — | |
Total distributions | | | — | | | | (1.49 | ) | | | (.98 | ) | | | (.10 | ) | | | (.11 | ) |
Net asset value, end of period | | $ | 26.59 | | | $ | 45.31 | | | $ | 47.35 | | | $ | 46.08 | | | $ | 38.33 | |
|
Total Returnb | | | (41.32 | %) | | | (0.88 | %) | | | 4.82 | % | | | 20.46 | % | | | (7.58 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 708 | | | $ | 1,842 | | | $ | 1,859 | | | $ | 3,266 | | | $ | 2,165 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.12 | %) | | | (0.85 | %) | | | (0.62 | %) | | | (0.85 | %) | | | (0.30 | %) |
Total expenses | | | 2.37 | % | | | 2.37 | % | | | 2.28 | % | | | 2.28 | % | | | 2.25 | % |
Portfolio turnover rate | | | 993 | % | | | 558 | % | | | 506 | % | | | 628 | % | | | 493 | % |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE VALUE FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 51.54 | | | $ | 53.25 | | | $ | 51.33 | | | $ | 42.38 | | | $ | 45.62 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .20 | | | | (.07 | ) | | | .04 | | | | (.07 | ) | | | .20 | |
Net gain (loss) on investments (realized and unrealized) | | | (21.26 | ) | | | (.15 | ) | | | 2.86 | | | | 9.12 | | | | (3.33 | ) |
Total from investment operations | | | (21.06 | ) | | | (.22 | ) | | | 2.90 | | | | 9.05 | | | | (3.13 | ) |
Less distributions from: |
Net investment income | | | — | | | | (.02 | ) | | | — | | | | (.10 | ) | | | (.11 | ) |
Net realized gains | | | — | | | | (1.47 | ) | | | (.98 | ) | | | — | | | | — | |
Total distributions | | | — | | | | (1.49 | ) | | | (.98 | ) | | | (.10 | ) | | | (.11 | ) |
Net asset value, end of period | | $ | 30.48 | | | $ | 51.54 | | | $ | 53.25 | | | $ | 51.33 | | | $ | 42.38 | |
|
Total Return | | | (40.86 | %) | | | (0.16 | %) | | | 5.58 | % | | | 21.36 | % | | | (6.86 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,618 | | | $ | 10,928 | | | $ | 7,888 | | | $ | 21,143 | | | $ | 48,048 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.39 | % | | | (0.13 | %) | | | 0.08 | % | | | (0.16 | %) | | | 0.47 | % |
Total expenses | | | 1.63 | % | | | 1.62 | % | | | 1.53 | % | | | 1.53 | % | | | 1.51 | % |
Portfolio turnover rate | | | 993 | % | | | 558 | % | | | 506 | % | | | 628 | % | | | 493 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for small-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P SmallCap 600® Pure Growth Index (the “underlying index”).
For the year ended March 31, 2020, S&P SmallCap 600 Pure Growth Fund H-Class return was -32.77%, compared with a return of -31.65% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The only sector contributing to the return of the underlying index for the period was Consumer Staples. The sectors detracting the most from return were Consumer Discretionary, Energy, and Industrials.
The holdings contributing the most to the return of the underlying index for the period were Avon Products, Inc., Arrowhead Pharmaceuticals, Inc., and Safehold, Inc. The holdings detracting the most from return were Talos Energy, Inc., NMI Holdings Plc, and Penn Virginia Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | September 1, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
Ten Largest Holdings (% of Total Net Assets) |
Safehold, Inc. | 2.9% |
Innovative Industrial Properties, Inc. | 2.1% |
Kinsale Capital Group, Inc. | 2.1% |
eHealth, Inc. | 1.9% |
Medpace Holdings, Inc. | 1.4% |
Federal Signal Corp. | 1.4% |
KEMET Corp. | 1.3% |
Wingstop, Inc. | 1.3% |
Brooks Automation, Inc. | 1.3% |
NeoGenomics, Inc. | 1.3% |
Top Ten Total | 17.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
42 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (32.77%) | (3.68%) | 5.54% |
A-Class Shares with sales charge‡ | (35.96%) | (4.61%) | 5.02% |
C-Class Shares | (33.28%) | (4.41%) | 4.75% |
C-Class Shares with CDSC§ | (33.95%) | (4.41%) | 4.75% |
H-Class Shares | (32.77%) | (3.68%) | 5.54% |
S&P SmallCap 600 Pure Growth Index | (31.65%) | (1.96%) | 7.58% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P SmallCap 600 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.5% |
| | | | | | | | | |
Industrial - 23.4% |
Federal Signal Corp. | | | 2,149 | | | $ | 58,625 | |
KEMET Corp. | | | 2,358 | | | | 56,969 | |
TopBuild Corp.* | | | 671 | | | | 48,071 | |
Universal Forest Products, Inc. | | | 1,175 | | | | 43,698 | |
Saia, Inc.* | | | 593 | | | | 43,609 | |
Griffon Corp. | | | 3,065 | | | | 38,772 | |
OSI Systems, Inc.* | | | 555 | | | | 38,251 | |
Ichor Holdings Ltd.* | | | 1,961 | | | | 37,573 | |
Simpson Manufacturing Company, Inc. | | | 598 | | | | 37,064 | |
Patrick Industries, Inc. | | | 1,275 | | | | 35,904 | |
Advanced Energy Industries, Inc.* | | | 674 | | | | 32,682 | |
ESCO Technologies, Inc. | | | 420 | | | | 31,882 | |
Alarm.com Holdings, Inc.* | | | 808 | | | | 31,439 | |
Aerojet Rocketdyne Holdings, Inc.* | | | 729 | | | | 30,494 | |
Exponent, Inc. | | | 418 | | | | 30,058 | |
American Woodmark Corp.* | | | 637 | | | | 29,028 | |
Franklin Electric Company, Inc. | | | 600 | | | | 28,278 | |
Fabrinet* | | | 509 | | | | 27,771 | |
John Bean Technologies Corp. | | | 367 | | | | 27,257 | |
Alamo Group, Inc. | | | 296 | | | | 26,279 | |
Itron, Inc.* | | | 456 | | | | 25,458 | |
Watts Water Technologies, Inc. — Class A | | | 292 | | | | 24,718 | |
AAON, Inc. | | | 496 | | | | 23,967 | |
Plexus Corp.* | | | 435 | | | | 23,734 | |
Forward Air Corp. | | | 468 | | | | 23,704 | |
Vicor Corp.* | | | 512 | | | | 22,805 | |
Tennant Co. | | | 393 | | | | 22,775 | |
Triumph Group, Inc. | | | 2,825 | | | | 19,097 | |
SPX FLOW, Inc.* | | | 665 | | | | 18,899 | |
SPX Corp.* | | | 528 | | | | 17,234 | |
Albany International Corp. — Class A | | | 361 | | | | 17,086 | |
Comtech Telecommunications Corp. | | | 1,037 | | | | 13,782 | |
CIRCOR International, Inc.* | | | 975 | | | | 11,339 | |
Total Industrial | | | | | | | 998,302 | |
| | | | | | | | | |
Financial - 18.3% |
Safehold, Inc. REIT | | | 1,986 | | | | 125,575 | |
Innovative Industrial Properties, Inc. REIT1 | | | 1,184 | | | | 89,901 | |
Kinsale Capital Group, Inc. | | | 858 | | | | 89,687 | |
eHealth, Inc.* | | | 592 | | | | 83,366 | |
Meta Financial Group, Inc. | | | 2,053 | | | | 44,591 | |
Virtus Investment Partners, Inc. | | | 565 | | | | 43,002 | |
Essential Properties Realty Trust, Inc. REIT | | | 3,269 | | | | 42,693 | |
Community Healthcare Trust, Inc. REIT | | | 1,085 | | | | 41,534 | |
Walker & Dunlop, Inc. | | | 901 | | | | 36,283 | |
Enova International, Inc.* | | | 2,188 | | | | 31,704 | |
NMI Holdings, Inc. — Class A* | | | 2,648 | | | | 30,743 | |
PennyMac Mortgage Investment Trust REIT | | | 2,738 | | | | 29,078 | |
Universal Health Realty Income Trust REIT | | | 266 | | | | 26,815 | |
Preferred Bank/Los Angeles CA | | | 628 | | | | 21,239 | |
Agree Realty Corp. REIT | | | 281 | | | | 17,394 | |
ServisFirst Bancshares, Inc. | | | 572 | | | | 16,771 | |
Granite Point Mortgage Trust, Inc. REIT | | | 2,730 | | | | 13,841 | |
Total Financial | | | | | | | 784,217 | |
Consumer, Non-cyclical - 18.0% |
Medpace Holdings, Inc.* | | | 832 | | | | 61,052 | |
NeoGenomics, Inc.* | | | 1,992 | | | | 54,999 | |
Innoviva, Inc.* | | | 4,217 | | | | 49,592 | |
Eagle Pharmaceuticals, Inc.* | | | 944 | | | | 43,424 | |
Cardiovascular Systems, Inc.* | | | 1,206 | | | | 42,463 | |
Rent-A-Center, Inc. | | | 2,978 | | | | 42,109 | |
Corcept Therapeutics, Inc.* | | | 3,266 | | | | 38,833 | |
Coca-Cola Consolidated, Inc. | | | 179 | | | | 37,327 | |
ANI Pharmaceuticals, Inc.* | | | 875 | | | | 35,647 | |
Hanger, Inc.* | | | 2,184 | | | | 34,027 | |
LHC Group, Inc.* | | | 242 | | | | 33,928 | |
Enanta Pharmaceuticals, Inc.* | | | 470 | | | | 24,172 | |
Addus HomeCare Corp.* | | | 344 | | | | 23,255 | |
Glaukos Corp.* | | | 746 | | | | 23,022 | |
RadNet, Inc.* | | | 2,099 | | | | 22,061 | |
Pennant Group, Inc.* | | | 1,513 | | | | 21,424 | |
CONMED Corp. | | | 357 | | | | 20,445 | |
LeMaitre Vascular, Inc. | | | 789 | | | | 19,662 | |
John B Sanfilippo & Son, Inc. | | | 214 | | | | 19,132 | |
Inter Parfums, Inc. | | | 381 | | | | 17,659 | |
Cutera, Inc.* | | | 1,324 | | | | 17,291 | |
EVERTEC, Inc. | | | 748 | | | | 17,002 | |
Anika Therapeutics, Inc.* | | | 576 | | | | 16,652 | |
REGENXBIO, Inc.* | | | 484 | | | | 15,672 | |
CorVel Corp.* | | | 237 | | | | 12,919 | |
Medifast, Inc.1 | | | 201 | | | | 12,562 | |
RR Donnelley & Sons Co. | | | 12,132 | | | | 11,629 | |
Total Consumer, Non-cyclical | | | | | | | 767,960 | |
| | | | | | | | | |
Technology - 14.3% |
Brooks Automation, Inc. | | | 1,857 | | | | 56,638 | |
Ultra Clean Holdings, Inc.* | | | 3,454 | | | | 47,665 | |
FormFactor, Inc.* | | | 2,193 | | | | 44,057 | |
TTEC Holdings, Inc. | | | 1,188 | | | | 43,623 | |
Xperi Corp. | | | 2,672 | | | | 37,168 | |
SPS Commerce, Inc.* | | | 779 | | | | 36,231 | |
Diodes, Inc.* | | | 847 | | | | 34,418 | |
ManTech International Corp. — Class A | | | 455 | | | | 33,065 | |
CSG Systems International, Inc. | | | 747 | | | | 31,262 | |
Qualys, Inc.* | | | 348 | | | | 30,273 | |
Glu Mobile, Inc.* | | | 4,458 | | | | 28,041 | |
3D Systems Corp.* | | | 3,362 | | | | 25,921 | |
Power Integrations, Inc. | | | 284 | | | | 25,086 | |
Virtusa Corp.* | | | 839 | | | | 23,828 | |
Agilysys, Inc.* | | | 1,414 | | | | 23,614 | |
ExlService Holdings, Inc.* | | | 430 | | | | 22,373 | |
LivePerson, Inc.* | | | 821 | | | | 18,678 | |
Digi International, Inc.* | | | 1,953 | | | | 18,631 | |
Diebold Nixdorf, Inc.* | | | 4,495 | | | | 15,822 | |
Progress Software Corp. | | | 439 | | | | 14,048 | |
Total Technology | | | | | | | 610,442 | |
| | | | | | | | | |
Consumer, Cyclical - 13.9% |
Wingstop, Inc. | | | 713 | | | | 56,826 | |
LGI Homes, Inc.* | | | 1,150 | | | | 51,922 | |
Installed Building Products, Inc.* | | | 1,141 | | | | 45,492 | |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND | |
| | Shares | | | Value | |
Winnebago Industries, Inc. | | | 1,614 | | | $ | 44,885 | |
Lithia Motors, Inc. — Class A | | | 436 | | | | 35,660 | |
MDC Holdings, Inc. | | | 1,360 | | | | 31,552 | |
Callaway Golf Co. | | | 2,965 | | | | 30,302 | |
Fox Factory Holding Corp.* | | | 718 | | | | 30,156 | |
LCI Industries | | | 443 | | | | 29,606 | |
Sleep Number Corp.* | | | 1,424 | | | | 27,284 | |
UniFirst Corp. | | | 170 | | | | 25,685 | |
Shake Shack, Inc. — Class A* | | | 632 | | | | 23,852 | |
Zumiez, Inc.* | | | 1,347 | | | | 23,330 | |
St. Joe Co.* | | | 1,378 | | | | 23,123 | |
Cavco Industries, Inc.* | | | 157 | | | | 22,756 | |
Universal Electronics, Inc.* | | | 546 | | | | 20,950 | |
Steven Madden Ltd. | | | 882 | | | | 20,489 | |
Allegiant Travel Co. — Class A | | | 194 | | | | 15,869 | |
Boot Barn Holdings, Inc.* | | | 1,077 | | | | 13,926 | |
Chuy’s Holdings, Inc.* | | | 1,213 | | | | 12,215 | |
Crocs, Inc.* | | | 598 | | | | 10,160 | |
Total Consumer, Cyclical | | | | | | | 596,040 | |
| | | | | | | | | |
Communications - 5.8% |
TechTarget, Inc.* | | | 1,930 | | | | 39,777 | |
Viavi Solutions, Inc.* | | | 3,168 | | | | 35,513 | |
Cogent Communications Holdings, Inc. | | | 413 | | | | 33,853 | |
NIC, Inc. | | | 1,389 | | | | 31,947 | |
Perficient, Inc.* | | | 957 | | | | 25,925 | |
Harmonic, Inc.* | | | 3,955 | | | | 22,781 | |
Extreme Networks, Inc.* | | | 5,375 | | | | 16,609 | |
8x8, Inc.* | | | 1,087 | | | | 15,066 | |
QuinStreet, Inc.* | | | 1,758 | | | | 14,152 | |
Shutterstock, Inc. | | | 437 | | | | 14,054 | |
Total Communications | | | | | | | 249,677 | |
| | | | | | | | | |
Energy - 3.5% |
DMC Global, Inc. | | | 1,556 | | | | 35,803 | |
Par Pacific Holdings, Inc.* | | | 4,171 | | | | 29,614 | |
Talos Energy, Inc.* | | | 4,534 | | | | 26,071 | |
Ring Energy, Inc.*,1 | | | 30,234 | | | | 19,915 | |
Geospace Technologies Corp.* | | | 3,019 | | | | 19,322 | |
Helix Energy Solutions Group, Inc.* | | | 6,583 | | | | 10,796 | |
Penn Virginia Corp.* | | | 2,642 | | | | 8,164 | |
Total Energy | | | | | | | 149,685 | |
Basic Materials - 2.3% |
Innospec, Inc. | | | 605 | | | | 42,041 | |
Schweitzer-Mauduit International, Inc. | | | 812 | | | | 22,590 | |
Koppers Holdings, Inc.* | | | 1,573 | | | | 19,458 | |
Rogers Corp.* | | | 154 | | | | 14,541 | |
Total Basic Materials | | | | | | | 98,630 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $5,009,676) | | | | | | | 4,254,953 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,2 - 0.4% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 11,925 | | | | 11,925 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 4,586 | | | | 4,586 | |
Total Repurchase Agreements | | | | |
(Cost $16,511) | | | | | | | 16,511 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,3 - 2.1% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%4 | | | 91,576 | | | | 91,576 | |
Total Securities Lending Collateral | | | | |
(Cost $91,576) | | | | | | | 91,576 | |
| | | | | | | | | |
Total Investments - 102.0% | | | | |
(Cost $5,117,763) | | $ | 4,363,040 | |
Other Assets & Liabilities, net - (2.0)% | | | (86,009 | ) |
Total Net Assets - 100.0% | | $ | 4,277,031 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 4,254,953 | | | $ | — | | | $ | — | | | $ | 4,254,953 | |
Repurchase Agreements | | | — | | | | 16,511 | | | | — | | | | 16,511 | |
Securities Lending Collateral | | | 91,576 | | | | — | | | | — | | | | 91,576 | |
Total Assets | | $ | 4,346,529 | | | $ | 16,511 | | | $ | — | | | $ | 4,363,040 | |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE GROWTH FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $82,725 of securities loaned (cost $5,101,252) | | $ | 4,346,529 | |
Repurchase agreements, at value (cost $16,511) | | | 16,511 | |
Cash | | | 13,237 | |
Receivables: |
Securities sold | | | 34,470 | |
Dividends | | | 3,911 | |
Fund shares sold | | | 189 | |
Securities lending income | | | 28 | |
Total assets | | | 4,414,875 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 91,576 | |
Fund shares redeemed | | | 30,236 | |
Management fees | | | 3,465 | |
Distribution and service fees | | | 1,615 | |
Transfer agent and administrative fees | | | 1,591 | |
Portfolio accounting fees | | | 462 | |
Trustees’ fees* | | | 132 | |
Miscellaneous | | | 8,767 | |
Total liabilities | | | 137,844 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 4,277,031 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 7,207,580 | |
Total distributable earnings (loss) | | | (2,930,549 | ) |
Net assets | | $ | 4,277,031 | |
| | | | | |
A-Class: |
Net assets | | $ | 1,168,560 | |
Capital shares outstanding | | | 26,652 | |
Net asset value per share | | $ | 43.85 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 46.04 | |
| | | | | |
C-Class: |
Net assets | | $ | 678,492 | |
Capital shares outstanding | | | 17,663 | |
Net asset value per share | | $ | 38.41 | |
| | | | | |
H-Class: |
Net assets | | $ | 2,429,979 | |
Capital shares outstanding | | | 55,429 | |
Net asset value per share | | $ | 43.84 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 95,383 | |
Interest | | | 1,190 | |
Income from securities lending, net | | | 4,161 | |
Total investment income | | | 100,734 | |
| | | | | |
Expenses: |
Management fees | | | 76,989 | |
Distribution and service fees: |
A-Class | | | 5,739 | |
C-Class | | | 10,159 | |
H-Class | | | 17,385 | |
Transfer agent and administrative fees | | | 26,100 | |
Registration fees | | | 10,984 | |
Portfolio accounting fees | | | 10,265 | |
Professional fees | | | 6,680 | |
Trustees’ fees* | | | 2,889 | |
Custodian fees | | | 1,481 | |
Line of credit fees | | | 13 | |
Miscellaneous | | | 6,029 | |
Total expenses | | | 174,713 | |
Net investment loss | | | (73,979 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (384,045 | ) |
Net realized loss | | | (384,045 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (2,835,633 | ) |
Net change in unrealized appreciation (depreciation) | | | (2,835,633 | ) |
Net realized and unrealized loss | | | (3,219,678 | ) |
Net decrease in net assets resulting from operations | | $ | (3,293,657 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
S&P SMALLCAP 600® PURE GROWTH FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (73,979 | ) | | $ | (322,961 | ) |
Net realized loss on investments | | | (384,045 | ) | | | (170,877 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (2,835,633 | ) | | | (396,935 | ) |
Net decrease in net assets resulting from operations | | | (3,293,657 | ) | | | (890,773 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | — | | | | (199,451 | ) |
C-Class | | | — | | | | (184,824 | ) |
H-Class | | | — | | | | (801,038 | ) |
Total distributions to shareholders | | | — | | | | (1,185,313 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 719,908 | | | | 7,538,860 | |
C-Class | | | 378,469 | | | | 3,647,297 | |
H-Class | | | 56,396,230 | | | | 129,539,372 | |
Distributions reinvested | | | | | | | | |
A-Class | | | — | | | | 186,968 | |
C-Class | | | — | | | | 176,270 | |
H-Class | | | — | | | | 791,837 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (1,307,711 | ) | | | (6,699,917 | ) |
C-Class | | | (595,749 | ) | | | (4,578,267 | ) |
H-Class | | | (59,193,712 | ) | | | (137,087,116 | ) |
Net decrease from capital share transactions | | | (3,602,565 | ) | | | (6,484,696 | ) |
Net decrease in net assets | | | (6,896,222 | ) | | | (8,560,782 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 11,173,253 | | | | 19,734,035 | |
End of year | | $ | 4,277,031 | | | $ | 11,173,253 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 11,355 | | | | 96,228 | |
C-Class | | | 6,675 | | | | 52,419 | |
H-Class | | | 877,834 | | | | 1,703,060 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | — | | | | 2,842 | |
C-Class | | | — | | | | 3,029 | |
H-Class | | | — | | | | 12,038 | |
Shares redeemed | | | | | | | | |
A-Class | | | (21,456 | ) | | | (88,180 | ) |
C-Class | | | (10,753 | ) | | | (70,247 | ) |
H-Class | | | (937,806 | ) | | | (1,815,964 | ) |
Net decrease in shares | | | (74,151 | ) | | | (104,775 | ) |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE GROWTH FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 65.22 | | | $ | 71.79 | | | $ | 65.58 | | | $ | 52.28 | | | $ | 58.90 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.44 | ) | | | (.70 | ) | | | (.63 | ) | | | (.41 | ) | | | (.20 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (20.93 | ) | | | (.94 | ) | | | 9.35 | | | | 13.71 | | | | (6.42 | ) |
Total from investment operations | | | (21.37 | ) | | | (1.64 | ) | | | 8.72 | | | | 13.30 | | | | (6.62 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (4.93 | ) | | | (2.51 | ) | | | — | | | | — | |
Total distributions | | | — | | | | (4.93 | ) | | | (2.51 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 43.85 | | | $ | 65.22 | | | $ | 71.79 | | | $ | 65.58 | | | $ | 52.28 | |
|
Total Returnb | | | (32.77 | %) | | | (2.34 | %) | | | 13.41 | % | | | 25.44 | % | | | (11.24 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,169 | | | $ | 2,397 | | | $ | 1,857 | | | $ | 2,526 | | | $ | 2,451 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.69 | %) | | | (0.93 | %) | | | (0.91 | %) | | | (0.71 | %) | | | (0.36 | %) |
Total expenses | | | 1.63 | % | | | 1.62 | % | | | 1.53 | % | | | 1.52 | % | | | 1.50 | % |
Portfolio turnover rate | | | 628 | % | | | 421 | % | | | 643 | % | | | 818 | % | | | 309 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 57.57 | | | $ | 64.43 | | | $ | 59.55 | | | $ | 47.82 | | | $ | 54.28 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.79 | ) | | | (1.16 | ) | | | (.96 | ) | | | (.79 | ) | | | (.62 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (18.37 | ) | | | (.77 | ) | | | 8.35 | | | | 12.52 | | | | (5.84 | ) |
Total from investment operations | | | (19.16 | ) | | | (1.93 | ) | | | 7.39 | | | | 11.73 | | | | (6.46 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (4.93 | ) | | | (2.51 | ) | | | — | | | | — | |
Total distributions | | | — | | | | (4.93 | ) | | | (2.51 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 38.41 | | | $ | 57.57 | | | $ | 64.43 | | | $ | 59.55 | | | $ | 47.82 | |
|
Total Returnb | | | (33.28 | %) | | | (3.06 | %) | | | 12.52 | % | | | 24.51 | % | | | (11.90 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 678 | | | $ | 1,252 | | | $ | 2,354 | | | $ | 3,054 | | | $ | 2,542 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.43 | %) | | | (1.70 | %) | | | (1.52 | %) | | | (1.48 | %) | | | (1.19 | %) |
Total expenses | | | 2.38 | % | | | 2.36 | % | | | 2.28 | % | | | 2.28 | % | | | 2.25 | % |
Portfolio turnover rate | | | 628 | % | | | 421 | % | | | 643 | % | | | 818 | % | | | 309 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
S&P SMALLCAP 600® PURE GROWTH FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 65.21 | | | $ | 71.78 | | | $ | 65.58 | | | $ | 52.27 | | | $ | 58.89 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.40 | ) | | | (.77 | ) | | | (.55 | ) | | | (.44 | ) | | | (.28 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (20.97 | ) | | | (.87 | ) | | | 9.26 | | | | 13.75 | | | | (6.34 | ) |
Total from investment operations | | | (21.37 | ) | | | (1.64 | ) | | | 8.71 | | | | 13.31 | | | | (6.62 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (4.93 | ) | | | (2.51 | ) | | | — | | | | — | |
Total distributions | | | — | | | | (4.93 | ) | | | (2.51 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 43.84 | | | $ | 65.21 | | | $ | 71.78 | | | $ | 65.58 | | | $ | 52.27 | |
|
Total Return | | | (32.77 | %) | | | (2.33 | %) | | | 13.38 | % | | | 25.46 | % | | | (11.24 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,430 | | | $ | 7,525 | | | $ | 15,523 | | | $ | 31,750 | | | $ | 25,046 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.63 | %) | | | (0.99 | %) | | | (0.80 | %) | | | (0.75 | %) | | | (0.49 | %) |
Total expenses | | | 1.63 | % | | | 1.61 | % | | | 1.53 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 628 | % | | | 421 | % | | | 643 | % | | | 818 | % | | | 309 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for small-cap value securities on a daily basis. The Fund’s current benchmark is the S&P SmallCap 600® Pure Value Index (the “underlying index”).
For the year ended March 31, 2020, S&P SmallCap 600 Pure Value Fund H-Class returned -47.87%, compared with a return of -46.25% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The sectors contributing the most to the return of the underlying index for the year were Information Technology and Health Care. The sectors detracting the most from return were Energy, Consumer Discretionary, and Industrials.
The holdings contributing the most to the return of the underlying index for the period were Ultra Clean Holdings, Inc., Seneca Foods Corp. Class A, and M/I Homes, Inc. The holdings detracting the most from return were Gannett Co., Inc., Denbury Resources, Inc., and Gulfport Energy Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | September 1, 2004 |
C-Class | February 20, 2004 |
H-Class | February 20, 2004 |
Ten Largest Holdings (% of Total Net Assets) |
Consolidated Communications Holdings, Inc. | 2.5% |
Atlas Air Worldwide Holdings, Inc. | 2.5% |
SpartanNash Co. | 2.4% |
Southwestern Energy Co. | 2.2% |
Seneca Foods Corp. — Class A | 2.0% |
Andersons, Inc. | 2.0% |
Renewable Energy Group, Inc. | 1.7% |
Office Depot, Inc. | 1.7% |
INTL FCStone, Inc. | 1.6% |
Greenbrier Companies, Inc. | 1.6% |
Top Ten Total | 20.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
| | THE RYDEX FUNDS ANNUAL REPORT | 51 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (47.83%) | (12.17%) | (1.86%) |
A-Class Shares with sales charge‡ | (50.31%) | (13.02%) | (2.34%) |
C-Class Shares | (48.24%) | (12.84%) | (2.61%) |
C-Class Shares with CDSC§ | (48.76%) | (12.84%) | (2.61%) |
H-Class Shares | (47.87%) | (12.15%) | (1.88%) |
S&P SmallCap 600 Pure Value Index | (46.25%) | (10.27%) | 0.74% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P SmallCap 600 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
52 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 99.8% |
| | | | | | | | | |
Consumer, Cyclical - 27.1% |
Office Depot, Inc. | | | 32,035 | | | $ | 52,537 | |
MarineMax, Inc.* | | | 4,097 | | | | 42,691 | |
Core-Mark Holding Company, Inc. | | | 1,490 | | | | 42,569 | |
Anixter International, Inc.* | | | 443 | | | | 38,926 | |
ScanSource, Inc.* | | | 1,686 | | | | 36,064 | |
Abercrombie & Fitch Co. — Class A | | | 3,646 | | | | 33,142 | |
Fossil Group, Inc.* | | | 9,651 | | | | 31,752 | |
Big Lots, Inc. | | | 2,044 | | | | 29,066 | |
Cooper-Standard Holdings, Inc.* | | | 2,812 | | | | 28,879 | |
Titan International, Inc. | | | 15,859 | | | | 24,581 | |
Movado Group, Inc. | | | 2,063 | | | | 24,385 | |
Veritiv Corp.* | | | 2,982 | | | | 23,439 | |
Vista Outdoor, Inc.* | | | 2,339 | | | | 20,583 | |
Group 1 Automotive, Inc. | | | 453 | | | | 20,050 | |
Daktronics, Inc. | | | 3,989 | | | | 19,666 | |
Sonic Automotive, Inc. — Class A | | | 1,455 | | | | 19,322 | |
Express, Inc.* | | | 12,021 | | | | 17,911 | |
Red Robin Gourmet Burgers, Inc.* | | | 2,080 | | | | 17,722 | |
Barnes & Noble Education, Inc.* | | | 12,855 | | | | 17,483 | |
Genesco, Inc.* | | | 1,295 | | | | 17,275 | |
Chico’s FAS, Inc. | | | 13,111 | | | | 16,913 | |
Wabash National Corp. | | | 2,328 | | | | 16,808 | |
Cooper Tire & Rubber Co. | | | 986 | | | | 16,072 | |
Cato Corp. — Class A | | | 1,436 | | | | 15,322 | |
Haverty Furniture Companies, Inc. | | | 1,228 | | | | 14,601 | |
Conn’s, Inc.* | | | 3,406 | | | | 14,237 | |
American Axle & Manufacturing Holdings, Inc.* | | | 3,816 | | | | 13,776 | |
GameStop Corp. — Class A*,1 | | | 3,849 | | | | 13,472 | |
Signet Jewelers Ltd. | | | 2,058 | | | | 13,274 | |
Ethan Allen Interiors, Inc. | | | 1,280 | | | | 13,081 | |
Shoe Carnival, Inc. | | | 619 | | | | 12,857 | |
Hawaiian Holdings, Inc. | | | 1,046 | | | | 10,920 | |
Designer Brands, Inc. — Class A | | | 2,188 | | | | 10,896 | |
Caleres, Inc. | | | 2,032 | | | | 10,566 | |
Unifi, Inc.* | | | 905 | | | | 10,453 | |
G-III Apparel Group Ltd.* | | | 1,275 | | | | 9,817 | |
Lumber Liquidators Holdings, Inc.* | | | 1,810 | | | | 8,489 | |
Tailored Brands, Inc.1 | | | 4,792 | | | | 8,338 | |
Garrett Motion, Inc.* | | | 2,389 | | | | 6,833 | |
J.C. Penney Company, Inc.* | | | 18,838 | | | | 6,782 | |
Michaels Companies, Inc.* | | | 3,527 | | | | 5,714 | |
Vera Bradley, Inc.* | | | 1,268 | | | | 5,224 | |
Tupperware Brands Corp. | | | 3,158 | | | | 5,116 | |
Total Consumer, Cyclical | | | | | | | 817,604 | |
| | | | | | | | | |
Consumer, Non-cyclical - 18.8% |
SpartanNash Co. | | | 5,061 | | | | 72,473 | |
Seneca Foods Corp. — Class A* | | | 1,510 | | | | 60,068 | |
Andersons, Inc. | | | 3,156 | | | | 59,175 | |
Fresh Del Monte Produce, Inc. | | | 1,682 | | | | 46,440 | |
Kelly Services, Inc. — Class A | | | 3,583 | | | | 45,468 | |
Invacare Corp. | | | 5,154 | | | | 38,294 | |
Magellan Health, Inc.* | | | 576 | | | | 27,712 | |
United Natural Foods, Inc.* | | | 3,011 | | | | 27,641 | |
Universal Corp. | | | 619 | | | | 27,366 | |
B&G Foods, Inc.1 | | | 1,432 | | | | 25,905 | |
Lannett Company, Inc.* | | | 3,514 | | | | 24,422 | |
TrueBlue, Inc.* | | | 1,663 | | | | 21,220 | |
Owens & Minor, Inc. | | | 2,240 | | | | 20,496 | |
ABM Industries, Inc. | | | 781 | | | | 19,025 | |
Central Garden & Pet Co. — Class A* | | | 641 | | | | 16,391 | |
Green Dot Corp. — Class A* | | | 623 | | | | 15,818 | |
Team, Inc.* | | | 2,108 | | | | 13,702 | |
Central Garden & Pet Co.* | | | 156 | | | | 4,290 | |
Total Consumer, Non-cyclical | | | | | | | 565,906 | |
| | | | | | | | | |
Industrial - 18.1% |
Atlas Air Worldwide Holdings, Inc.* | | | 2,931 | | | | 75,239 | |
Greenbrier Companies, Inc. | | | 2,644 | | | | 46,905 | |
Echo Global Logistics, Inc.* | | | 2,503 | | | | 42,751 | |
Olympic Steel, Inc. | | | 4,120 | | | | 42,642 | |
Sanmina Corp.* | | | 1,563 | | | | 42,638 | |
ArcBest Corp. | | | 2,361 | | | | 41,365 | |
TimkenSteel Corp.* | | | 7,651 | | | | 24,713 | |
TTM Technologies, Inc.* | | | 2,373 | | | | 24,537 | |
Hub Group, Inc. — Class A* | | | 537 | | | | 24,417 | |
Granite Construction, Inc. | | | 1,595 | | | | 24,212 | |
Boise Cascade Co. | | | 833 | | | | 19,808 | |
Bel Fuse, Inc. — Class B | | | 1,981 | | | | 19,295 | |
Briggs & Stratton Corp. | | | 10,163 | | | | 18,395 | |
Arcosa, Inc. | | | 457 | | | | 18,161 | |
Lydall, Inc.* | | | 2,779 | | | | 17,952 | |
LSB Industries, Inc.* | | | 6,099 | | | | 12,808 | |
Aegion Corp. — Class A* | | | 697 | | | | 12,497 | |
Trinseo S.A. | | | 686 | | | | 12,424 | |
Applied Optoelectronics, Inc.* | | | 1,371 | | | | 10,406 | |
US Concrete, Inc.* | | | 470 | | | | 8,526 | |
DXP Enterprises, Inc.* | | | 419 | | | | 5,137 | |
Total Industrial | | | | | | | 544,828 | |
| | | | | | | | | |
Energy - 14.3% |
Southwestern Energy Co.*,1 | | | 38,864 | | | | 65,680 | |
Renewable Energy Group, Inc.* | | | 2,560 | | | | 52,557 | |
Exterran Corp.* | | | 8,345 | | | | 40,056 | |
Green Plains, Inc. | | | 4,461 | | | | 21,636 | |
CONSOL Energy, Inc.* | | | 5,847 | | | | 21,575 | |
Bonanza Creek Energy, Inc.* | | | 1,857 | | | | 20,891 | |
SunCoke Energy, Inc. | | | 5,161 | | | | 19,870 | |
Era Group, Inc.* | | | 3,063 | | | | 16,326 | |
Matrix Service Co.* | | | 1,576 | | | | 14,925 | |
ProPetro Holding Corp.* | | | 5,533 | | | | 13,832 | |
Gulfport Energy Corp.* | | | 29,256 | | | | 13,010 | |
RPC, Inc.1 | | | 5,840 | | | | 12,030 | |
Denbury Resources, Inc.* | | | 64,783 | | | | 11,959 | |
Range Resources Corp.1 | | | 5,217 | | | | 11,895 | |
TETRA Technologies, Inc.* | | | 34,719 | | | | 11,110 | |
Warrior Met Coal, Inc. | | | 910 | | | | 9,664 | |
Whiting Petroleum Corp.* | | | 13,826 | | | | 9,269 | |
Oasis Petroleum, Inc.* | | | 25,112 | | | | 8,789 | |
HighPoint Resources Corp.* | | | 38,799 | | | | 7,372 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND | |
| | Shares | | | Value | |
Laredo Petroleum, Inc.* | | | 19,331 | | | $ | 7,342 | |
KLX Energy Services Holdings, Inc.* | | | 10,317 | | | | 7,222 | |
US Silica Holdings, Inc. | | | 3,788 | | | | 6,818 | |
SM Energy Co. | | | 5,220 | | | | 6,368 | |
Noble Corporation plc* | | | 20,667 | | | | 5,374 | |
Valaris plc* | | | 8,505 | | | | 3,828 | |
Oceaneering International, Inc.* | | | 1,188 | | | | 3,493 | |
Nabors Industries Ltd. | | | 8,796 | | | | 3,431 | |
Oil States International, Inc.* | | | 1,585 | | | | 3,218 | |
Total Energy | | | | | | | 429,540 | |
| | | | | | | | | |
Financial - 11.8% |
INTL FCStone, Inc.* | | | 1,335 | | | | 48,407 | |
EZCORP, Inc. — Class A* | | | 10,716 | | | | 44,686 | |
FGL Holdings | | | 3,410 | | | | 33,418 | |
iStar, Inc. REIT | | | 2,307 | | | | 24,477 | |
American Equity Investment Life Holding Co. | | | 975 | | | | 18,330 | |
Stewart Information Services Corp. | | | 669 | | | | 17,842 | |
Realogy Holdings Corp. | | | 5,845 | | | | 17,594 | |
United Insurance Holdings Corp. | | | 1,494 | | | | 13,805 | |
Encore Capital Group, Inc.* | | | 561 | | | | 13,116 | |
Horace Mann Educators Corp. | | | 339 | | | | 12,404 | |
Third Point Reinsurance Ltd.* | | | 1,551 | | | | 11,493 | |
United Fire Group, Inc. | | | 325 | | | | 10,598 | |
Simmons First National Corp. — Class A | | | 554 | | | | 10,194 | |
Hope Bancorp, Inc. | | | 1,199 | | | | 9,856 | |
Opus Bank | | | 554 | | | | 9,601 | |
Cedar Realty Trust, Inc. REIT | | | 9,723 | | | | 9,072 | |
Customers Bancorp, Inc.* | | | 809 | | | | 8,842 | |
Cadence BanCorp | | | 1,304 | | | | 8,541 | |
Pacific Premier Bancorp, Inc. | | | 423 | | | | 7,969 | |
Ready Capital Corp. REIT | | | 999 | | | | 7,213 | |
Hersha Hospitality Trust REIT | | | 1,945 | | | | 6,963 | |
Berkshire Hills Bancorp, Inc. | | | 466 | | | | 6,925 | |
CBL & Associates Properties, Inc. REIT* | | | 18,699 | | | | 3,742 | |
Total Financial | | | | | | | 355,088 | |
| | | | | | | | | |
Communications - 4.6% |
Consolidated Communications Holdings, Inc. | | | 16,689 | | | | 75,935 | |
Gannett Company, Inc. | | | 11,472 | | | | 16,979 | |
NETGEAR, Inc.* | | | 734 | | | | 16,765 | |
Spok Holdings, Inc. | | | 1,496 | | | | 15,992 | |
Scholastic Corp. | | | 546 | | | | 13,917 | |
Total Communications | | | | | | | 139,588 | |
| | | | | | | | | |
Basic Materials - 3.0% |
Clearwater Paper Corp.* | | | 933 | | | | 20,349 | |
Kraton Corp.* | | | 2,375 | | | | 19,237 | |
AdvanSix, Inc.* | | | 1,925 | | | | 18,365 | |
Century Aluminum Co.* | | | 5,065 | | | | 18,335 | |
Rayonier Advanced Materials, Inc. | | | 14,501 | | | | 15,371 | |
Total Basic Materials | | | | | | | 91,657 | |
| | | | | | | | | |
Technology - 2.1% |
Donnelley Financial Solutions, Inc.* | | | 4,012 | | | | 21,143 | |
Unisys Corp.* | | | 1,630 | | | | 20,131 | |
Pitney Bowes, Inc. | | | 5,086 | | | | 10,375 | |
Photronics, Inc.* | | | 1,006 | | | | 10,322 | |
Total Technology | | | | | | | 61,971 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $3,366,799) | | | | | | | 3,006,182 | |
| | | | | | | | | |
RIGHTS††† - 0.0% |
BASIC MATERIALS - 0.0% |
A Schulman, Inc.*,2 | | | 1,520 | | | | — | |
Total Rights | | | | |
(Cost $—) | | | | | | | — | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
REPURCHASE AGREEMENTS††,3 - 0.3% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | $ | 6,963 | | | | 6,963 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 2,678 | | | | 2,678 | |
Total Repurchase Agreements | | | | |
(Cost $9,641) | | | | | | | 9,641 | |
| | | | | | | | | |
| | | Shares | | | | | |
SECURITIES LENDING COLLATERAL†,4 - 3.1% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%5 | | | 93,624 | | | | 93,624 | |
Total Securities Lending Collateral | | | | |
(Cost $93,624) | | | | | | | 93,624 | |
| | | | | | | | | |
Total Investments - 103.2% | | | | |
(Cost $3,470,064) | | $ | 3,109,447 | |
Other Assets & Liabilities, net - (3.2)% | | | (95,353 | ) |
Total Net Assets - 100.0% | | $ | 3,014,094 | |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at March 31, 2020. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
3 | Repurchase Agreements — See Note 6. |
4 | Securities lending collateral — See Note 7. |
5 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 3,006,182 | | | $ | — | | | $ | — | | | $ | 3,006,182 | |
Rights | | | — | | | | — | | | | — | * | | | — | |
Repurchase Agreements | | | — | | | | 9,641 | | | | — | | | | 9,641 | |
Securities Lending Collateral | | | 93,624 | | | | — | | | | — | | | | 93,624 | |
Total Assets | | $ | 3,099,806 | | | $ | 9,641 | | | $ | — | | | $ | 3,109,447 | |
* | Security has a market value of $0. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
S&P SMALLCAP 600® PURE VALUE FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value - including $91,270 of securities loaned (cost $3,460,423) | | $ | 3,099,806 | |
Repurchase agreements, at value (cost $9,641) | | | 9,641 | |
Cash | | | 8,636 | |
Receivables: |
Dividends | | | 3,123 | |
Securities lending income | | | 177 | |
Total assets | | | 3,121,383 | |
| | | | | |
Liabilities: |
Payable for: |
Return of securities lending collateral | | | 93,624 | |
Fund shares redeemed | | | 5,805 | |
Management fees | | | 1,630 | |
Transfer agent and administrative fees | | | 789 | |
Distribution and service fees | | | 770 | |
Portfolio accounting fees | | | 217 | |
Trustees’ fees* | | | 60 | |
Miscellaneous | | | 4,394 | |
Total liabilities | | | 107,289 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 3,014,094 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 11,488,205 | |
Total distributable earnings (loss) | | | (8,474,111 | ) |
Net assets | | $ | 3,014,094 | |
| | | | | |
A-Class: |
Net assets | | $ | 935,644 | |
Capital shares outstanding | | | 69,362 | |
Net asset value per share | | $ | 13.49 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 14.16 | |
| | | | | |
C-Class: |
Net assets | | $ | 571,438 | |
Capital shares outstanding | | | 49,855 | |
Net asset value per share | | $ | 11.46 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,507,012 | |
Capital shares outstanding | | | 112,051 | |
Net asset value per share | | $ | 13.45 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 122,795 | |
Interest | | | 1,322 | |
Income from securities lending, net | | | 8,910 | |
Total investment income | | | 133,027 | |
| | | | | |
Expenses: |
Management fees | | | 83,092 | |
Distribution and service fees: |
A-Class | | | 3,147 | |
C-Class | | | 5,279 | |
H-Class | | | 23,230 | |
Transfer agent and administrative fees | | | 27,942 | |
Registration fees | | | 12,019 | |
Portfolio accounting fees | | | 11,079 | |
Professional fees | | | 6,581 | |
Trustees’ fees* | | | 2,913 | |
Printing fees | | | 2,622 | |
Custodian fees | | | 1,576 | |
Line of credit fees | | | 290 | |
Miscellaneous | | | 5,715 | |
Total expenses | | | 185,485 | |
Net investment loss | | | (52,458 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (777,560 | ) |
Net realized loss | | | (777,560 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (1,353,130 | ) |
Net change in unrealized appreciation (depreciation) | | | (1,353,130 | ) |
Net realized and unrealized loss | | | (2,130,690 | ) |
Net decrease in net assets resulting from operations | | $ | (2,183,148 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE VALUE FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income (loss) | | $ | (52,458 | ) | | $ | 4,020 | |
Net realized loss on investments | | | (777,560 | ) | | | (597,081 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (1,353,130 | ) | | | 112,414 | |
Net decrease in net assets resulting from operations | | | (2,183,148 | ) | | | (480,647 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 1,507,622 | | | | 3,963,689 | |
C-Class | | | 873,764 | | | | 1,906,223 | |
H-Class | | | 136,769,330 | | | | 90,671,854 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (1,281,826 | ) | | | (3,227,735 | ) |
C-Class | | | (1,203,729 | ) | | | (2,343,774 | ) |
H-Class | | | (142,913,535 | ) | | | (88,932,802 | ) |
Net increase (decrease) from capital share transactions | | | (6,248,374 | ) | | | 2,037,455 | |
Net increase (decrease) in net assets | | | (8,431,522 | ) | | | 1,556,808 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 11,445,616 | | | | 9,888,808 | |
End of year | | $ | 3,014,094 | | | $ | 11,445,616 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 67,970 | | | | 137,867 | |
C-Class | | | 58,172 | | | | 76,965 | |
H-Class | | | 5,501,520 | | | | 3,174,393 | |
Shares redeemed | | | | | | | | |
A-Class | | | (50,006 | ) | | | (114,025 | ) |
C-Class | | | (55,955 | ) | | | (93,594 | ) |
H-Class | | | (5,740,669 | ) | | | (3,098,645 | ) |
Net increase (decrease) in shares | | | (218,968 | ) | | | 82,961 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
S&P SMALLCAP 600® PURE VALUE FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 25.86 | | | $ | 27.64 | | | $ | 27.24 | | | $ | 23.16 | | | $ | 25.81 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.10 | ) | | | .06 | | | | (.08 | ) | | | (.14 | ) | | | (.10 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (12.27 | ) | | | (1.84 | ) | | | .48 | | | | 4.22 | | | | (2.55 | ) |
Total from investment operations | | | (12.37 | ) | | | (1.78 | ) | | | .40 | | | | 4.08 | | | | (2.65 | ) |
Net asset value, end of period | | $ | 13.49 | | | $ | 25.86 | | | $ | 27.64 | | | $ | 27.24 | | | $ | 23.16 | |
|
Total Returnb | | | (47.83 | %) | | | (6.44 | %) | | | 1.47 | % | | | 17.62 | % | | | (10.27 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 936 | | | $ | 1,329 | | | $ | 762 | | | $ | 1,720 | | | $ | 1,113 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.42 | %) | | | 0.21 | % | | | (0.30 | %) | | | (0.50 | %) | | | (0.42 | %) |
Total expenses | | | 1.63 | % | | | 1.62 | % | | | 1.53 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 1,104 | % | | | 534 | % | | | 1,832 | % | | | 1,449 | % | | | 417 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 22.14 | | | $ | 23.84 | | | $ | 23.68 | | | $ | 20.28 | | | $ | 22.78 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.25 | ) | | | (.13 | ) | | | (.21 | ) | | | (.28 | ) | | | (.24 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (10.43 | ) | | | (1.57 | ) | | | .37 | | | | 3.68 | | | | (2.26 | ) |
Total from investment operations | | | (10.68 | ) | | | (1.70 | ) | | | .16 | | | | 3.40 | | | | (2.50 | ) |
Net asset value, end of period | | $ | 11.46 | | | $ | 22.14 | | | $ | 23.84 | | | $ | 23.68 | | | $ | 20.28 | |
|
Total Returnb | | | (48.24 | %) | | | (7.13 | %) | | | 0.68 | % | | | 16.77 | % | | | (10.97 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 571 | | | $ | 1,055 | | | $ | 1,532 | | | $ | 1,778 | | | $ | 1,847 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.20 | %) | | | (0.53 | %) | | | (0.90 | %) | | | (1.26 | %) | | | (1.17 | %) |
Total expenses | | | 2.38 | % | | | 2.36 | % | | | 2.28 | % | | | 2.28 | % | | | 2.25 | % |
Portfolio turnover rate | | | 1,104 | % | | | 534 | % | | | 1,832 | % | | | 1,449 | % | | | 417 | % |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE VALUE FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 25.80 | | | $ | 27.57 | | | $ | 27.13 | | | $ | 23.07 | | | $ | 25.71 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.11 | ) | | | .02 | | | | (.09 | ) | | | (.12 | ) | | | (.07 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (12.24 | ) | | | (1.79 | ) | | | .53 | | | | 4.18 | | | | (2.57 | ) |
Total from investment operations | | | (12.35 | ) | | | (1.77 | ) | | | .44 | | | | 4.06 | | | | (2.64 | ) |
Net asset value, end of period | | $ | 13.45 | | | $ | 25.80 | | | $ | 27.57 | | | $ | 27.13 | | | $ | 23.07 | |
|
Total Return | | | (47.87 | %) | | | (6.42 | %) | | | 1.62 | % | | | 17.60 | % | | | (10.27 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,507 | | | $ | 9,062 | | | $ | 7,595 | | | $ | 19,782 | | | $ | 18,071 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.44 | %) | | | 0.06 | % | | | (0.32 | %) | | | (0.47 | %) | | | (0.32 | %) |
Total expenses | | | 1.64 | % | | | 1.62 | % | | | 1.53 | % | | | 1.53 | % | | | 1.50 | % |
Portfolio turnover rate | | | 1,104 | % | | | 534 | % | | | 1,832 | % | | | 1,449 | % | | | 417 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
EUROPE 1.25x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark. The Fund’s current benchmark is 125% of the fair value of the STOXX® Europe 50 Index (the “underlying index”).
For the one year period ended March 31, 2020, Europe 1.25x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 125% of the daily price movement of the underlying index. Europe 1.25x Strategy Fund H-Class returned -18.28% while the underlying index returned -11.52% over the same period.
No sector contributed to the return of the underlying index for the period. The sectors detracting the most from return were Financials, Industrials, and Consumer Staples.
The holdings contributing the most to the return of the underlying index for the period were Nestle S.A., ASML Holding N.V., and Roche Holding AG. The holdings detracting the most from return were BP Plc, HSBE Holdings Plc, and Banco Santander S.A.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
60 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | March 31, 2004 |
C-Class | May 10, 2001 |
H-Class | May 8, 2000 |
Country Diversification
Country | % of
Long-Term
Investments |
United Kingdom | 30.2% |
Switzerland | 24.0% |
France | 18.4% |
Germany | 12.1% |
Netherlands | 5.5% |
Italy | 3.0% |
Denmark | 2.9% |
Spain | 2.7% |
Other | 1.2% |
Total Long-Term Investments | 100.0% |
Ten Largest Holdings (% of Total Net Assets) |
Guggenheim Strategy Fund II | 14.5% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 13.6% |
Nestle S.A. ADR | 2.1% |
Roche Holding AG ADR | 1.6% |
Novartis AG ADR | 1.4% |
SAP SE ADR | 0.8% |
AstraZeneca plc ADR | 0.8% |
HSBC Holdings plc ADR | 0.8% |
ASML Holding N.V. — Class G | 0.7% |
Novo Nordisk A/S ADR | 0.7% |
Top Ten Total | 37.0% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (18.25%) | (3.75%) | (0.93%) |
A-Class Shares with sales charge‡ | (22.13%) | (4.69%) | (1.41%) |
C-Class Shares | (18.79%) | (4.42%) | (1.74%) |
C-Class Shares with CDSC§ | (19.60%) | (4.42%) | (1.74%) |
H-Class Shares | (18.28%) | (3.72%) | (1.01%) |
STOXX Europe 50 Index | (11.52%) | (0.85%) | 1.65% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The STOXX Europe 50 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 61 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
EUROPE 1.25x STRATEGY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 24.3% |
| | | | | | | | | |
Consumer, Non-cyclical - 11.5% |
Nestle S.A. ADR | | | 379 | | | $ | 39,033 | |
Roche Holding AG ADR | | | 716 | | | | 29,048 | |
Novartis AG ADR | | | 305 | | | | 25,147 | |
AstraZeneca plc ADR | | | 331 | | | | 14,782 | |
Novo Nordisk A/S ADR | | | 219 | | | | 13,184 | |
Sanofi ADR | | | 289 | | | | 12,635 | |
GlaxoSmithKline plc ADR | | | 317 | | | | 12,011 | |
British American Tobacco plc ADR | | | 288 | | | | 9,847 | |
Diageo plc ADR | | | 74 | | | | 9,407 | |
Unilever N.V. — Class Y | | | 174 | | | | 8,489 | |
L’Oreal S.A. ADR | | | 155 | | | | 8,138 | |
Unilever plc ADR | | | 147 | | | | 7,434 | |
Bayer AG ADR1 | | | 501 | | | | 7,250 | |
Reckitt Benckiser Group plc ADR | | | 464 | | | | 7,148 | |
RELX plc ADR | | | 251 | | | | 5,371 | |
Anheuser-Busch InBev S.A. ADR1 | | | 108 | | | | 4,765 | |
Total Consumer, Non-cyclical | | | | | | | 213,689 | |
| | | | | | | | | |
Financial - 3.4% |
HSBC Holdings plc ADR | | | 527 | | | | 14,761 | |
Allianz SE ADR* | | | 534 | | | | 9,051 | |
Zurich Insurance Group AG ADR | | | 192 | | | | 6,777 | |
Banco Santander S.A. ADR | | | 2,135 | | | | 5,017 | |
AXA S.A. ADR | | | 261 | | | | 4,513 | |
BNP Paribas S.A. ADR | | | 296 | | | | 4,458 | |
UBS Group AG* | | | 455 | | | | 4,213 | |
Prudential plc ADR | | | 165 | | | | 4,089 | |
Lloyds Banking Group plc ADR | | | 2,351 | | | | 3,550 | |
Intesa Sanpaolo SpA ADR | | | 345 | | | | 3,392 | |
ING Groep N.V. ADR | | | 501 | | | | 2,580 | |
Total Financial | | | | | | | 62,401 | |
| | | | | | | | | |
Energy - 1.9% |
Total S.A. ADR | | | 331 | | | | 12,326 | |
BP plc ADR | | | 432 | | | | 10,537 | |
Royal Dutch Shell plc — Class A ADR | | | 263 | | | | 9,176 | |
Eni SpA ADR | | | 161 | | | | 3,191 | |
Total Energy | | | | | | | 35,230 | |
| | | | | | | | | |
Industrial - 1.8% |
Siemens AG ADR | | | 205 | | | | 8,610 | |
Schneider Electric SE ADR | | | 348 | | | | 5,951 | |
Vinci S.A. ADR | | | 282 | | | | 5,747 | |
Airbus SE ADR | | | 296 | | | | 4,780 | |
Safran S.A. ADR | | | 184 | | | | 4,013 | |
ABB Ltd. ADR | | | 226 | | | | 3,901 | |
Total Industrial | | | | | | | 33,002 | |
| | | | | | | | | |
Basic Materials - 1.7% |
Linde plc | | | 70 | | | | 12,110 | |
Air Liquide S.A. ADR | | | 304 | | | | 7,705 | |
Rio Tinto plc ADR | | | 135 | | | | 6,150 | |
BASF SE ADR | | | 474 | | | | 5,546 | |
Total Basic Materials | | | | | | | 31,511 | |
Technology - 1.6% |
SAP SE ADR1 | | | 139 | | | | 15,360 | |
ASML Holding N.V. — Class G | | | 53 | | | | 13,867 | |
Total Technology | | | | | | | 29,227 | |
| | | | | | | | | |
Utilities - 1.0% |
Iberdrola S.A. ADR | | | 189 | | | | 7,353 | |
Enel SpA ADR | | | 998 | | | | 7,006 | |
National Grid plc ADR | | | 88 | | | | 5,128 | |
Total Utilities | | | | | | | 19,487 | |
| | | | | | | | | |
Consumer, Cyclical - 0.9% |
LVMH Moet Hennessy Louis Vuitton SE ADR | | | 169 | | | | 12,576 | |
Daimler AG ADR | | | 433 | | | | 3,217 | |
Total Consumer, Cyclical | | | | | | | 15,793 | |
| | | | | | | | | |
Communications - 0.5% |
Deutsche Telekom AG ADR* | | | 412 | | | | 5,331 | |
Vodafone Group plc ADR | | | 339 | | | | 4,668 | |
Total Communications | | | | | | | 9,999 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $434,463) | | | | | | | 450,339 | |
| | | | | | | | | |
MUTUAL FUNDS† - 28.1% |
Guggenheim Strategy Fund II2 | | | 11,196 | | | | 269,269 | |
Guggenheim Ultra Short Duration Fund — Institutional Class2 | | | 25,819 | | | | 252,254 | |
Total Mutual Funds | | | | |
(Cost $534,490) | | | | | | | 521,523 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
U.S. TREASURY BILLS†† - 7.2% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | $ | 133,000 | | | | 132,994 | |
Total U.S. Treasury Bills | | | | |
(Cost $132,945) | | | | | | | 132,994 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,5 - 18.8% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | | 252,383 | | | | 252,383 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 97,071 | | | | 97,071 | |
Total Repurchase Agreements | | | | |
(Cost $349,454) | | | | | | | 349,454 | |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
EUROPE 1.25x STRATEGY FUND | |
| | Shares | | | Value | |
SECURITIES LENDING COLLATERAL†,6 - 1.1% |
Money Market Fund | | | | | | | | |
First American Government Obligations Fund — Class Z, 0.39%7 | | | 21,155 | | | $ | 21,155 | |
Total Securities Lending Collateral | | | | |
(Cost $21,155) | | | | | | | 21,155 | |
| | | | | | | | | |
Total Investments - 79.5% | | | | |
(Cost $1,472,507) | | $ | 1,475,465 | |
Other Assets & Liabilities, net - 20.5% | | | 381,548 | |
Total Net Assets - 100.0% | | $ | 1,857,013 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation)** | |
Equity Futures Contracts Purchased† |
STOXX Europe 50 Index Futures Contracts | | | 62 | | | | Jun 2020 | | | $ | 1,821,318 | | | $ | 160,993 | |
| |
Currency Futures Contracts Purchased† |
Euro FX Futures Contracts | | | 14 | | | | Jun 2020 | | | | 1,936,113 | | | | (16,004 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | Securities lending collateral — See Note 7. |
7 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
EUROPE 1.25x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 450,339 | | | $ | — | | | $ | — | | | $ | 450,339 | |
Mutual Funds | | | 521,523 | | | | — | | | | — | | | | 521,523 | |
U.S. Treasury Bills | | | — | | | | 132,994 | | | | — | | | | 132,994 | |
Repurchase Agreements | | | — | | | | 349,454 | | | | — | | | | 349,454 | |
Securities Lending Collateral | | | 21,155 | | | | — | | | | — | | | | 21,155 | |
Equity Futures Contracts** | | | 160,993 | | | | — | | | | — | | | | 160,993 | |
Total Assets | | $ | 1,154,010 | | | $ | 482,448 | | | $ | — | | | $ | 1,636,458 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Currency Futures Contracts** | | $ | 16,004 | | | $ | — | | | $ | — | | | $ | 16,004 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 1,602,092 | | | $ | 3,400,000 | | | $ | (4,720,000 | ) | | $ | (8,723 | ) | | $ | (4,100 | ) | | $ | 269,269 | | | | 11,196 | | | $ | 38,376 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 1,659,329 | | | | 3,300,000 | | | | (4,700,000 | ) | | | (2,394 | ) | | | (4,681 | ) | | | 252,254 | | | | 25,819 | | | | 32,774 | |
| | | $ | 3,261,421 | | | $ | 6,700,000 | | | $ | (9,420,000 | ) | | $ | (11,117 | ) | | $ | (8,781 | ) | | $ | 521,523 | | | | | | | $ | 71,150 | |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EUROPE 1.25x STRATEGY FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value - including $20,492 of securities loaned (cost $588,563) | | $ | 604,488 | |
Investments in affiliated issuers, at value (cost $534,490) | | | 521,523 | |
Repurchase agreements, at value (cost $349,454) | | | 349,454 | |
Foreign currency, at value (cost $195,794) | | | 196,093 | |
Cash | | | 84,498 | |
Segregated cash with broker | | | 286,032 | |
Receivables: |
Foreign tax reclaims | | | 17,600 | |
Dividends | | | 2,158 | |
Fund shares sold | | | 1,270 | |
Securities lending income | | | 8 | |
Total assets | | | 2,063,124 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 178,930 | |
Return of securities lending collateral | | | 21,155 | |
Management fees | | | 1,033 | |
Transfer agent and administrative fees | | | 435 | |
Distribution and service fees | | | 391 | |
Variation margin on futures contracts | | | 272 | |
Portfolio accounting fees | | | 121 | |
Trustees’ fees* | | | 32 | |
Miscellaneous | | | 3,742 | |
Total liabilities | | | 206,111 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 1,857,013 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 2,248,906 | |
Total distributable earnings (loss) | | | (391,893 | ) |
Net assets | | $ | 1,857,013 | |
| | | | | |
A-Class: |
Net assets | | $ | 217,337 | |
Capital shares outstanding | | | 3,136 | |
Net asset value per share | | $ | 69.30 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 72.76 | |
| | | | | |
C-Class: |
Net assets | | $ | 296,100 | |
Capital shares outstanding | | | 5,084 | |
Net asset value per share | | $ | 58.24 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,343,576 | |
Capital shares outstanding | | | 19,531 | |
Net asset value per share | | $ | 68.79 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $5,801) | | $ | 71,623 | |
Dividends from securities of affiliated issuers | | | 71,150 | |
Interest | | | 83,866 | |
Income from securities lending, net | | | 1,326 | |
Total investment income | | | 227,965 | |
| | | | | |
Expenses: |
Management fees | | | 84,784 | |
Distribution and service fees: |
A-Class | | | 380 | |
C-Class | | | 682 | |
H-Class | | | 23,000 | |
Transfer agent and administrative fees | | | 23,684 | |
Portfolio accounting fees | | | 9,420 | |
Registration fees | | | 6,759 | |
Professional fees | | | 4,535 | |
Printing fees | | | 3,920 | |
Pricing fees | | | 2,183 | |
Licensing fees | | | 2,122 | |
Trustees’ fees* | | | 1,911 | |
Custodian fees | | | 1,141 | |
Line of credit fees | | | 4 | |
Miscellaneous | | | 5,341 | |
Total expenses | | | 169,866 | |
Less: |
Expenses waived by Adviser | | | (3,356 | ) |
Net expenses | | | 166,510 | |
Net investment income | | | 61,455 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 230,492 | |
Investments in affiliated issuers | | | (11,117 | ) |
Futures contracts | | | (85,515 | ) |
Foreign currency transactions | | | 6,718 | |
Net realized gain | | | 140,578 | |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (156,227 | ) |
Investments in affiliated issuers | | | (8,781 | ) |
Futures contracts | | | 85,388 | |
Foreign currency translations | | | 256 | |
Net change in unrealized appreciation (depreciation) | | | (79,364 | ) |
Net realized and unrealized gain | | | 61,214 | |
Net increase in net assets resulting from operations | | $ | 122,669 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
EUROPE 1.25x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 61,455 | | | $ | 62,717 | |
Net realized gain (loss) on investments | | | 140,578 | | | | (586,715 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (79,364 | ) | | | 7,390 | |
Net increase (decrease) in net assets resulting from operations | | | 122,669 | | | | (516,608 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (1,228 | ) | | | (11,761 | ) |
C-Class | | | (1,486 | ) | | | (5,085 | ) |
H-Class | | | (58,704 | ) | | | (138,834 | ) |
Total distributions to shareholders | | | (61,418 | ) | | | (155,680 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 260,090 | | | | 113,776 | |
C-Class | | | 1,532,352 | | | | 1,056,521 | |
H-Class | | | 341,054,759 | | | | 190,754,647 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 999 | | | | 9,063 | |
C-Class | | | 1,157 | | | | 5,085 | |
H-Class | | | 57,686 | | | | 136,099 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (241,632 | ) | | | (311,969 | ) |
C-Class | | | (1,307,652 | ) | | | (1,209,501 | ) |
H-Class | | | (377,010,299 | ) | | | (156,987,688 | ) |
Net increase (decrease) from capital share transactions | | | (35,652,540 | ) | | | 33,566,033 | |
Net increase (decrease) in net assets | | | (35,591,289 | ) | | | 32,893,745 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 37,448,302 | | | | 4,554,557 | |
End of year | | $ | 1,857,013 | | | $ | 37,448,302 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 3,600 | | | | 1,280 | |
C-Class | | | 21,584 | | | | 13,646 | |
H-Class | | | 3,874,912 | | | | 2,140,485 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 11 | | | | 121 | |
C-Class | | | 15 | | | | 80 | |
H-Class | | | 633 | | | | 1,829 | |
Shares redeemed | | | | | | | | |
A-Class | | | (2,632 | ) | | | (3,484 | ) |
C-Class | | | (16,852 | ) | | | (15,670 | ) |
H-Class | | | (4,296,290 | ) | | | (1,744,293 | ) |
Net increase (decrease) in shares | | | (415,019 | ) | | | 393,994 | |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EUROPE 1.25x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 85.18 | | | $ | 94.56 | | | $ | 84.99 | | | $ | 78.10 | | | $ | 93.32 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .63 | | | | 1.70 | | | | .82 | | | | 1.08 | | | | (.06 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (16.07 | )f | | | (4.78 | ) | | | 8.99 | | | | 6.51 | | | | (14.44 | ) |
Total from investment operations | | | (15.44 | ) | | | (3.08 | ) | | | 9.81 | | | | 7.59 | | | | (14.50 | ) |
Less distributions from: |
Net investment income | | | (.44 | ) | | | (6.30 | ) | | | (.24 | ) | | | (.70 | ) | | | (.72 | ) |
Total distributions | | | (.44 | ) | | | (6.30 | ) | | | (.24 | ) | | | (.70 | ) | | | (.72 | ) |
Net asset value, end of period | | $ | 69.30 | | | $ | 85.18 | | | $ | 94.56 | | | $ | 84.99 | | | $ | 78.10 | |
|
Total Returnb | | | (18.25 | %) | | | (2.32 | %) | | | 11.53 | % | | | 9.83 | % | | | (15.58 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 217 | | | $ | 184 | | | $ | 401 | | | $ | 417 | | | $ | 859 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.72 | % | | | 1.89 | % | | | 0.88 | % | | | 1.35 | % | | | (0.08 | %) |
Total expensesc | | | 1.77 | % | | | 1.76 | % | | | 1.71 | % | | | 1.72 | % | | | 1.67 | % |
Net expensesd | | | 1.73 | % | | | 1.76 | % | | | 1.71 | % | | | 1.72 | % | | | 1.67 | % |
Portfolio turnover rate | | | 1,787 | % | | | 1,411 | % | | | 422 | % | | | 1,616 | % | | | 920 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 72.13 | | | $ | 81.77 | | | $ | 74.07 | | | $ | 68.62 | | | $ | 82.63 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.18 | ) | | | .96 | | | | (.09 | ) | | | .35 | | | | (.54 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (13.27 | )f | | | (4.30 | ) | | | 8.03 | | | | 5.80 | | | | (12.75 | ) |
Total from investment operations | | | (13.45 | ) | | | (3.34 | ) | | | 7.94 | | | | 6.15 | | | | (13.29 | ) |
Less distributions from: |
Net investment income | | | (.44 | ) | | | (6.30 | ) | | | (.24 | ) | | | (.70 | ) | | | (.72 | ) |
Total distributions | | | (.44 | ) | | | (6.30 | ) | | | (.24 | ) | | | (.70 | ) | | | (.72 | ) |
Net asset value, end of period | | $ | 58.24 | | | $ | 72.13 | | | $ | 81.77 | | | $ | 74.07 | | | $ | 68.62 | |
|
Total Returnb | | | (18.79 | %) | | | (3.04 | %) | | | 10.70 | % | | | 9.09 | % | | | (16.14 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 296 | | | $ | 24 | | | $ | 187 | | | $ | 840 | | | $ | 440 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.25 | %) | | | 1.22 | % | | | (0.11 | %) | | | 0.50 | % | | | (0.64 | %) |
Total expensesc | | | 2.49 | % | | | 2.50 | % | | | 2.46 | % | | | 2.49 | % | | | 2.42 | % |
Net expensesd | | | 2.45 | % | | | 2.50 | % | | | 2.46 | % | | | 2.49 | % | | | 2.42 | % |
Portfolio turnover rate | | | 1,787 | % | | | 1,411 | % | | | 422 | % | | | 1,616 | % | | | 920 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
EUROPE 1.25x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 84.58 | | | $ | 93.89 | | | $ | 84.38 | | | $ | 77.38 | | | $ | 92.50 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .58 | | | | 1.26 | | | | 1.02 | | | | .46 | | | | .18 | |
Net gain (loss) on investments (realized and unrealized) | | | (15.93 | )f | | | (4.27 | ) | | | 8.73 | | | | 7.24 | | | | (14.58 | ) |
Total from investment operations | | | (15.35 | ) | | | (3.01 | ) | | | 9.75 | | | | 7.70 | | | | (14.40 | ) |
Less distributions from: |
Net investment income | | | (.44 | ) | | | (6.30 | ) | | | (.24 | ) | | | (.70 | ) | | | (.72 | ) |
Total distributions | | | (.44 | ) | | | (6.30 | ) | | | (.24 | ) | | | (.70 | ) | | | (.72 | ) |
Net asset value, end of period | | $ | 68.79 | | | $ | 84.58 | | | $ | 93.89 | | | $ | 84.38 | | | $ | 77.38 | |
|
Total Return | | | (18.28 | %) | | | (2.28 | %) | | | 11.55 | % | | | 10.06 | % | | | (15.64 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,344 | | | $ | 37,240 | | | $ | 3,967 | | | $ | 6,439 | | | $ | 4,533 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.66 | % | | | 1.42 | % | | | 1.09 | % | | | 0.59 | % | | | 0.19 | % |
Total expensesc | | | 1.80 | % | | | 1.76 | % | | | 1.71 | % | | | 1.73 | % | | | 1.66 | % |
Net expensesd | | | 1.76 | % | | | 1.76 | % | | | 1.71 | % | | | 1.73 | % | | | 1.66 | % |
Portfolio turnover rate | | | 1,787 | % | | | 1,411 | % | | | 422 | % | | | 1,616 | % | | | 920 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the periods presented through March 31, 2017 have been restated to reflect a 1:6 reverse share split effective October 28, 2016. |
f | The amount shown for a share outstanding throughout the period does not accord with the aggregate net gains on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
JAPAN 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark. The Fund’s current benchmark is 200% of the fair value of the Nikkei-225 Stock Average Index (the “underlying index”).
For the one year period ended March 31, 2020, Japan 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the fair value of the underlying index. Japan 2x Strategy Fund H-Class returned -20.17%, while the underlying index returned -8.32% over the same time period.
The sectors contributing the most to the return of the underlying index for the period were Information Technology and Health Care. The sectors detracting the most from return were Industrials, Financials, and Materials.
The holdings contributing the most to the return of the underlying index for the period were Fast Retailing Co. Ltd., Tokyo Electron Ltd., and Advantest Corp. Those detracting most from return were SoftBank Group Corp., Mitsubishi UFJ Financial Group, Inc., and Sumitomo Mitsui Financial Group, Inc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
| | THE RYDEX FUNDS ANNUAL REPORT | 69 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | February 22, 2008 |
C-Class | February 22, 2008 |
H-Class | February 22, 2008 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) |
Guggenheim Ultra Short Duration Fund — Institutional Class | 16.5% |
Guggenheim Strategy Fund II | 16.0% |
Total | 32.5% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (20.15%) | 1.29% | 4.18% |
A-Class Shares with sales charge‡ | (23.94%) | 0.31% | 3.67% |
C-Class Shares | (20.75%) | 0.53% | 3.47% |
C-Class Shares with CDSC§ | (21.53%) | 0.53% | 3.47% |
H-Class Shares | (20.17%) | 1.36% | 4.26% |
Nikkei-225 Stock Average Index | (8.32%) | 1.85% | 3.99% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Nikkei-225 Stock Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
70 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
JAPAN 2x STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 32.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 16,474 | | | $ | 160,954 | |
Guggenheim Strategy Fund II1 | | | 6,492 | | | | 156,143 | |
Total Mutual Funds | | | | |
(Cost $325,163) | | | | | | | 317,097 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 20.4% |
Federal Farm Credit Bank |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | | $ | 100,000 | | | | 100,220 | |
0.38% (3 Month U.S. Treasury Bill Rate + 0.29%, Rate Floor: 0.00%) due 04/11/222 | | | 100,000 | | | | 99,836 | |
Total Federal Agency Notes | | | | |
(Cost $200,000) | | | | | | | 200,056 | |
U.S. TREASURY BILLS†† - 13.7% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 134,000 | | | | 133,994 | |
Total U.S. Treasury Bills | | | | |
(Cost $133,945) | | | | | | | 133,994 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,5 - 19.1% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/20 | | | 134,819 | | | | 134,819 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/20 | | | 51,853 | | | | 51,853 | |
Total Repurchase Agreements | | | | |
(Cost $186,672) | | | | | | | 186,672 | |
| | | | | | | | | |
Total Investments - 85.6% | | | | |
(Cost $845,780) | | $ | 837,819 | |
Other Assets & Liabilities, net - 14.4% | | | 140,434 | |
Total Net Assets - 100.0% | | $ | 978,253 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation)** | |
Currency Futures Contracts Purchased† |
Japanese Yen Futures Contracts | | | 17 | | | | Jun 2020 | | | $ | 1,982,625 | | | $ | 29,735 | |
| |
Equity Futures Contracts Purchased† |
Nikkei 225 (CME) Index Futures Contracts | | | 21 | | | | Jun 2020 | | | | 1,990,800 | | | | (52,426 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
| | CME — Chicago Mercantile Exchange |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
JAPAN 2x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 317,097 | | | $ | — | | | $ | — | | | $ | 317,097 | |
Federal Agency Notes | | | — | | | | 200,056 | | | | — | | | | 200,056 | |
U.S. Treasury Bills | | | — | | | | 133,994 | | | | — | | | | 133,994 | |
Repurchase Agreements | | | — | | | | 186,672 | | | | — | | | | 186,672 | |
Currency Futures Contracts** | | | 29,735 | | | | — | | | | — | | | | 29,735 | |
Total Assets | | $ | 346,832 | | | $ | 520,722 | | | $ | — | | | $ | 867,554 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Futures Contracts** | | $ | 52,426 | | | $ | — | | | $ | — | | | $ | 52,426 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 551,937 | | | $ | — | | | $ | (390,000 | ) | | $ | (2,975 | ) | | $ | (2,819 | ) | | $ | 156,143 | | | | 6,492 | | | $ | 14,561 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 544,826 | | | | — | | | | (380,000 | ) | | | (1,497 | ) | | | (2,375 | ) | | | 160,954 | | | | 16,474 | | | | 10,204 | |
| | | $ | 1,096,763 | | | $ | — | | | $ | (770,000 | ) | | $ | (4,472 | ) | | $ | (5,194 | ) | | $ | 317,097 | | | | | | | $ | 24,765 | |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $333,945) | | $ | 334,050 | |
Investments in affiliated issuers, at value (cost $325,163) | | | 317,097 | |
Repurchase agreements, at value (cost $186,672) | | | 186,672 | |
Cash | | | 149,657 | |
Segregated cash with broker | | | 35,275 | |
Receivables: |
Dividends | | | 922 | |
Interest | | | 355 | |
Fund shares sold | | | 300 | |
Total assets | | | 1,024,328 | |
| | | | | |
Liabilities: |
Payable for: |
Variation margin on futures contracts | | | 31,944 | |
Fund shares redeemed | | | 11,469 | |
Management fees | | | 577 | |
Transfer agent and administrative fees | | | 288 | |
Distribution and service fees | | | 224 | |
Portfolio accounting fees | | | 85 | |
Trustees’ fees* | | | 23 | |
Miscellaneous | | | 1,465 | |
Total liabilities | | | 46,075 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 978,253 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 3,831,826 | |
Total distributable earnings (loss) | | | (2,853,573 | ) |
Net assets | | $ | 978,253 | |
| | | | | |
A-Class: |
Net assets | | $ | 140,544 | |
Capital shares outstanding | | | 1,480 | |
Net asset value per share | | $ | 94.96 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 99.70 | |
| | | | | |
C-Class: |
Net assets | | $ | 20,855 | |
Capital shares outstanding | | | 240 | |
Net asset value per share | | $ | 87.00 | |
| | | | | |
H-Class: |
Net assets | | $ | 816,854 | |
Capital shares outstanding | | | 8,536 | |
Net asset value per share | | $ | 95.70 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 24,765 | |
Interest | | | 22,787 | |
Total investment income | | | 47,552 | |
| | | | | |
Expenses: |
Management fees | | | 15,734 | |
Distribution and service fees: |
A-Class | | | 617 | |
C-Class | | | 337 | |
H-Class | | | 4,544 | |
Transfer agent and administrative fees | | | 5,322 | |
Portfolio accounting fees | | | 2,097 | |
Registration fees | | | 1,799 | |
Professional fees | | | 617 | |
Trustees’ fees* | | | 449 | |
Custodian fees | | | 298 | |
Line of credit fees | | | 10 | |
Miscellaneous | | | 2,538 | |
Total expenses | | | 34,362 | |
Less: |
Expenses waived by Adviser | | | (1,043 | ) |
Net expenses | | | 33,319 | |
Net investment income | | | 14,233 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 3,104 | |
Investments in affiliated issuers | | | (4,472 | ) |
Futures contracts | | | (376,018 | ) |
Net realized loss | | | (377,386 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 190 | |
Investments in affiliated issuers | | | (5,194 | ) |
Futures contracts | | | (1,783 | ) |
Net change in unrealized appreciation (depreciation) | | | (6,787 | ) |
Net realized and unrealized loss | | | (384,173 | ) |
Net decrease in net assets resulting from operations | | $ | (369,940 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 14,233 | | | $ | 33,302 | |
Net realized loss on investments | | | (377,386 | ) | | | (316,418 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (6,787 | ) | | | (411,313 | ) |
Net decrease in net assets resulting from operations | | | (369,940 | ) | | | (694,429 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (2,129 | ) | | | (900 | ) |
C-Class | | | (330 | ) | | | (137 | ) |
H-Class | | | (17,851 | ) | | | (12,057 | ) |
Total distributions to shareholders | | | (20,310 | ) | | | (13,094 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 444,621 | | | | 172,222 | |
C-Class | | | 353,184 | | | | 625,943 | |
H-Class | | | 26,008,199 | | | | 120,323,537 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 1,354 | | | | 583 | |
C-Class | | | 321 | | | | 134 | |
H-Class | | | 14,464 | | | | 11,391 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (458,558 | ) | | | (326,361 | ) |
C-Class | | | (353,755 | ) | | | (662,832 | ) |
H-Class | | | (26,780,558 | ) | | | (122,716,606 | ) |
Net decrease from capital share transactions | | | (770,728 | ) | | | (2,571,989 | ) |
Net decrease in net assets | | | (1,160,978 | ) | | | (3,279,512 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 2,139,231 | | | | 5,418,743 | |
End of year | | $ | 978,253 | | | $ | 2,139,231 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 3,455 | | | | 1,347 | |
C-Class | | | 2,897 | | | | 5,185 | |
H-Class | | | 205,913 | | | | 907,364 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 9 | | | | 5 | |
C-Class | | | 2 | | | | 1 | |
H-Class | | | 98 | | | | 95 | |
Shares redeemed | | | | | | | | |
A-Class | | | (3,747 | ) | | | (2,550 | ) |
C-Class | | | (2,928 | ) | | | (5,457 | ) |
H-Class | | | (213,175 | ) | | | (927,706 | ) |
Net decrease in shares | | | (7,476 | ) | | | (21,716 | ) |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 119.96 | | | $ | 136.57 | | | $ | 102.24 | | | $ | 78.81 | | | $ | 93.15 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .91 | | | | 1.22 | | | | (.03 | ) | | | (.74 | ) | | | (1.12 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (24.67 | ) | | | (17.32 | ) | | | 38.80 | f | | | 24.17 | | | | (13.22 | ) |
Total from investment operations | | | (23.76 | ) | | | (16.10 | ) | | | 38.77 | | | | 23.43 | | | | (14.34 | ) |
Less distributions from: |
Net investment income | | | (1.24 | ) | | | (.51 | ) | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | — | | | | (4.44 | ) | | | — | | | | — | |
Total distributions | | | (1.24 | ) | | | (.51 | ) | | | (4.44 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 94.96 | | | $ | 119.96 | | | $ | 136.57 | | | $ | 102.24 | | | $ | 78.81 | |
|
Total Returnb | | | (20.15 | %) | | | (11.79 | %) | | | 37.94 | % | | | 29.73 | % | | | (15.41 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 141 | | | $ | 211 | | | $ | 404 | | | $ | 389 | | | $ | 351 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.70 | % | | | 0.93 | % | | | (0.02 | %) | | | (0.80 | %) | | | (1.22 | %) |
Total expensesc | | | 1.63 | % | | | 1.58 | % | | | 1.51 | % | | | 1.52 | % | | | 1.51 | % |
Net expensesd | | | 1.57 | % | | | 1.56 | % | | | 1.51 | % | | | 1.52 | % | | | 1.51 | % |
Portfolio turnover rate | | | — | | | | — | | | | 17 | % | | | 1,225 | % | | | 543 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 110.80 | | | $ | 127.14 | | | $ | 96.17 | | | $ | 74.63 | | | $ | 88.92 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.06 | ) | | | .19 | | | | (.80 | ) | | | (1.33 | ) | | | (1.68 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (22.50 | ) | | | (16.02 | ) | | | 36.21 | f | | | 22.87 | | | | (12.61 | ) |
Total from investment operations | | | (22.56 | ) | | | (15.83 | ) | | | 35.41 | | | | 21.54 | | | | (14.29 | ) |
Less distributions from: |
Net investment income | | | (1.24 | ) | | | (.51 | ) | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | — | | | | (4.44 | ) | | | — | | | | — | |
Total distributions | | | (1.24 | ) | | | (.51 | ) | | | (4.44 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 87.00 | | | $ | 110.80 | | | $ | 127.14 | | | $ | 96.17 | | | $ | 74.63 | |
|
Total Returnb | | | (20.75 | %) | | | (12.43 | %) | | | 36.90 | % | | | 28.74 | % | | | (16.06 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 21 | | | $ | 30 | | | $ | 69 | | | $ | 52 | | | $ | 56 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.05 | %) | | | 0.16 | % | | | (0.68 | %) | | | (1.53 | %) | | | (1.91 | %) |
Total expensesc | | | 2.38 | % | | | 2.33 | % | | | 2.26 | % | | | 2.27 | % | | | 2.24 | % |
Net expensesd | | | 2.32 | % | | | 2.31 | % | | | 2.26 | % | | | 2.27 | % | | | 2.24 | % |
Portfolio turnover rate | | | — | | | | — | | | | 17 | % | | | 1,225 | % | | | 543 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 120.89 | | | $ | 137.58 | | | $ | 102.97 | | | $ | 79.15 | | | $ | 93.52 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .90 | | | | 1.09 | | | | (.12 | ) | | | (.86 | ) | | | (1.08 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (24.85 | ) | | | (17.27 | ) | | | 39.17 | f | | | 24.68 | | | | (13.29 | ) |
Total from investment operations | | | (23.95 | ) | | | (16.18 | ) | | | 39.05 | | | | 23.82 | | | | (14.37 | ) |
Less distributions from: |
Net investment income | | | (1.24 | ) | | | (.51 | ) | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | — | | | | (4.44 | ) | | | — | | | | — | |
Total distributions | | | (1.24 | ) | | | (.51 | ) | | | (4.44 | ) | | | — | | | | — | |
Net asset value, end of period | | $ | 95.70 | | | $ | 120.89 | | | $ | 137.58 | | | $ | 102.97 | | | $ | 79.15 | |
|
Total Return | | | (20.17 | %) | | | (11.76 | %) | | | 37.95 | % | | | 30.08 | % | | | (15.36 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 817 | | | $ | 1,898 | | | $ | 4,946 | | | $ | 3,145 | | | $ | 2,413 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.69 | % | | | 0.83 | % | | | (0.10 | %) | | | (0.95 | %) | | | (1.17 | %) |
Total expensesc | | | 1.63 | % | | | 1.58 | % | | | 1.50 | % | | | 1.52 | % | | | 1.49 | % |
Net expensesd | | | 1.58 | % | | | 1.57 | % | | | 1.50 | % | | | 1.52 | % | | | 1.49 | % |
Portfolio turnover rate | | | — | | | | — | | | | 17 | % | | | 1,225 | % | | | 543 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the years presented through March 31, 2017 have been restated to reflect a 1:4 share split effective November 4, 2016. |
f | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the period because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
STRENGTHENING DOLLAR 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the U.S. Dollar Index® (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one year period ended March 31, 2020, Strengthening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the underlying index. Strengthening Dollar 2x Strategy Fund H-Class returned 6.39%, compared with a return of 1.82% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the values of the U.S. Dollar relative to the British Pound, Euro, and Canadian Dollar. The values of the U.S. Dollar relative to the Japanese Yen and Swiss Franc detracted the most from performance.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
| | THE RYDEX FUNDS ANNUAL REPORT | 77 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | May 25, 2005 |
C-Class | May 25, 2005 |
H-Class | May 25, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) |
Guggenheim Ultra Short Duration Fund — Institutional Class | 9.6% |
Guggenheim Strategy Fund II | 9.5% |
Total | 19.1% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 6.38% | 0.82% | 1.68% |
A-Class Shares with sales charge‡ | 1.32% | (0.16%) | 1.19% |
C-Class Shares | 5.62% | 0.07% | 0.92% |
C-Class Shares with CDSC§ | 4.62% | 0.07% | 0.92% |
H-Class Shares | 6.39% | 0.82% | 1.69% |
U.S. Dollar Index | 1.82% | 0.14% | 2.02% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
78 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 19.1% |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 129,747 | | | $ | 1,267,630 | |
Guggenheim Strategy Fund II1 | | | 52,018 | | | | 1,251,036 | |
Total Mutual Funds | | | | |
(Cost $2,584,320) | | | | | | | 2,518,666 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 9.0% |
Federal Farm Credit Bank |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | | $ | 500,000 | | | | 501,102 | |
0.44% (U.S. Prime Rate - 2.81%, Rate Floor: 0.00%) due 05/20/222 | | | 180,000 | | | | 180,391 | |
Fannie Mae |
0.23% (U.S. Secured Overnight Financing Rate + 0.22%, Rate Floor: 0.00%) due 03/16/222 | | | 500,000 | | | | 499,010 | |
Total Federal Agency Notes | | | | |
(Cost $1,180,000) | | | | | | | 1,180,503 | |
U.S. TREASURY BILLS†† - 1.9% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 246,000 | | | | 245,989 | |
Total U.S. Treasury Bills | | | | |
(Cost $245,900) | | | | | | | 245,989 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,5 - 37.7% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | | 3,592,954 | | | | 3,592,954 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 1,381,905 | | | | 1,381,905 | |
Total Repurchase Agreements | | | | |
(Cost $4,974,859) | | | | | | | 4,974,859 | |
| | | | | | | | | |
Total Investments - 67.7% | | | | |
(Cost $8,985,079) | | $ | 8,920,017 | |
Other Assets & Liabilities, net - 32.3% | | | 4,260,958 | |
Total Net Assets - 100.0% | | $ | 13,180,975 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Currency Futures Contracts Purchased† |
U.S. Dollar Index Futures Contracts | | | 239 | | | | Jun 2020 | | | $ | 23,653,830 | | | $ | 213,600 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay
(Receive) | Payment
Frequency | | Maturity Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation | |
OTC Currency Index Swap Agreements†† |
Goldman Sachs International | U.S. Dollar Index | N/A | At Maturity | | | 06/19/20 | | | | 27,660 | | | $ | 2,736,210 | | | $ | 55,165 | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as currency index swap collateral at March 31, 2020. |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 2,518,666 | | | $ | — | | | $ | — | | | $ | 2,518,666 | |
Federal Agency Notes | | | — | | | | 1,180,503 | | | | — | | | | 1,180,503 | |
U.S. Treasury Bills | | | — | | | | 245,989 | | | | — | | | | 245,989 | |
Repurchase Agreements | | | — | | | | 4,974,859 | | | | — | | | | 4,974,859 | |
Currency Futures Contracts** | | | 213,600 | | | | — | | | | — | | | | 213,600 | |
Currency Index Swap Agreements** | | | — | | | | 55,165 | | | | — | | | | 55,165 | |
Total Assets | | $ | 2,732,266 | | | $ | 6,456,516 | | | $ | — | | | $ | 9,188,782 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 1,491,136 | | | $ | — | | | $ | (200,000 | ) | | $ | (1,554 | ) | | $ | (38,546 | ) | | $ | 1,251,036 | | | | 52,018 | | | $ | 39,720 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 1,493,579 | | | | — | | | | (200,000 | ) | | | (954 | ) | | | (24,995 | ) | | | 1,267,630 | | | | 129,747 | | | | 32,451 | |
| | | $ | 2,984,715 | | | $ | — | | | $ | (400,000 | ) | | $ | (2,508 | ) | | $ | (63,541 | ) | | $ | 2,518,666 | | | | | | | $ | 72,171 | |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STRENGTHENING DOLLAR 2x STRATEGY FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $1,425,900) | | $ | 1,426,492 | |
Investments in affiliated issuers, at value (cost $2,584,320) | | | 2,518,666 | |
Repurchase agreements, at value (cost $4,974,859) | | | 4,974,859 | |
Cash | | | 3,959,940 | |
Segregated cash with broker | | | 352,740 | |
Unrealized appreciation on OTC swap agreements | | | 55,165 | |
Receivables: |
Fund shares sold | | | 9,790 | |
Swap settlement | | | 7,615 | |
Dividends | | | 4,747 | |
Interest | | | 517 | |
Total assets | | | 13,310,531 | |
| | | | | |
Liabilities: |
Payable for: |
Variation margin on futures contracts | | | 74,329 | |
Fund shares redeemed | | | 19,374 | |
Licensing fees | | | 8,785 | |
Management fees | | | 7,255 | |
Transfer agent and administrative fees | | | 2,451 | |
Distribution and service fees | | | 2,141 | |
Portfolio accounting fees | | | 835 | |
Trustees’ fees* | | | 221 | |
Miscellaneous | | | 14,165 | |
Total liabilities | | | 129,556 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 13,180,975 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 31,755,236 | |
Total distributable earnings (loss) | | | (18,574,261 | ) |
Net assets | | $ | 13,180,975 | |
| | | | | |
A-Class: |
Net assets | | $ | 2,535,331 | |
Capital shares outstanding | | | 45,815 | |
Net asset value per share | | $ | 55.34 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 58.10 | |
| | | | | |
C-Class: |
Net assets | | $ | 96,339 | |
Capital shares outstanding | | | 1,963 | |
Net asset value per share | | $ | 49.08 | |
| | | | | |
H-Class: |
Net assets | | $ | 10,549,305 | |
Capital shares outstanding | | | 191,376 | |
Net asset value per share | | $ | 55.12 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 72,171 | |
Interest | | | 98,802 | |
Total investment income | | | 170,973 | |
| | | | | |
Expenses: |
Management fees | | | 70,023 | |
Distribution and service fees: |
A-Class | | | 4,097 | |
C-Class | | | 1,920 | |
H-Class | | | 14,874 | |
Transfer agent and administrative fees | | | 19,814 | |
Licensing fees | | | 17,667 | |
Portfolio accounting fees | | | 7,780 | |
Professional fees | | | 2,907 | |
Trustees’ fees* | | | 1,909 | |
Custodian fees | | | 1,113 | |
Line of credit fees | | | 17 | |
Miscellaneous | | | 15,001 | |
Total expenses | | | 157,122 | |
Less: |
Expenses waived by Adviser | | | (3,338 | ) |
Net expenses | | | 153,784 | |
Net investment income | | | 17,189 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in unaffiliated issuers | | | 1,480 | |
Investments in affiliated issuers | | | (2,508 | ) |
Swap agreements | | | (13,409 | ) |
Futures contracts | | | (50,465 | ) |
Net realized loss | | | (64,902 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 1,257 | |
Investments in affiliated issuers | | | (63,541 | ) |
Swap agreements | | | 46,386 | |
Futures contracts | | | 102,745 | |
Net change in unrealized appreciation (depreciation) | | | 86,847 | |
Net realized and unrealized gain | | | 21,945 | |
Net increase in net assets resulting from operations | | $ | 39,134 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 17,189 | | | $ | 47,969 | |
Net realized gain (loss) on investments | | | (64,902 | ) | | | 2,695,502 | |
Net change in unrealized appreciation (depreciation) on investments | | | 86,847 | | | | 86,614 | |
Net increase in net assets resulting from operations | | | 39,134 | | | | 2,830,085 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (9,611 | ) | | | — | |
C-Class | | | (807 | ) | | | — | |
H-Class | | | (35,177 | ) | | | — | |
Total distributions to shareholders | | | (45,595 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 3,235,923 | | | | 6,926,805 | |
C-Class | | | 215,609 | | | | 3,989,197 | |
H-Class | | | 77,816,276 | | | | 109,304,977 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 9,238 | | | | — | |
C-Class | | | 804 | | | | — | |
H-Class | | | 34,387 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (2,491,383 | ) | | | (7,246,656 | ) |
C-Class | | | (919,579 | ) | | | (4,150,682 | ) |
H-Class | | | (72,303,681 | ) | | | (112,677,372 | ) |
Net increase (decrease) from capital share transactions | | | 5,597,594 | | | | (3,853,731 | ) |
Net increase (decrease) in net assets | | | 5,591,133 | | | | (1,023,646 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 7,589,842 | | | | 8,613,488 | |
End of year | | $ | 13,180,975 | | | $ | 7,589,842 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 57,467 | | | | 147,999 | |
C-Class | | | 4,363 | | | | 92,512 | |
H-Class | | | 1,436,108 | | | | 2,248,108 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 173 | | | | — | |
C-Class | | | 17 | | | | — | |
H-Class | | | 648 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (45,804 | ) | | | (148,943 | ) |
C-Class | | | (19,278 | ) | | | (95,966 | ) |
H-Class | | | (1,341,390 | ) | | | (2,297,724 | ) |
Net increase (decrease) in shares | | | 92,304 | | | | (54,014 | ) |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STRENGTHENING DOLLAR 2x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 52.46 | | | $ | 43.45 | | | $ | 53.23 | | | $ | 47.68 | | | $ | 55.75 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .16 | | | | .19 | | | | (.16 | ) | | | (.55 | ) | | | (.58 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.17 | | | | 8.82 | | | | (9.62 | ) | | | 6.10 | | | | (5.32 | ) |
Total from investment operations | | | 3.33 | | | | 9.01 | | | | (9.78 | ) | | | 5.55 | | | | (5.90 | ) |
Less distributions from: |
Net investment income | | | (.45 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (2.17 | ) |
Total distributions | | | (.45 | ) | | | — | | | | — | | | | — | | | | (2.17 | ) |
Net asset value, end of period | | $ | 55.34 | | | $ | 52.46 | | | $ | 43.45 | | | $ | 53.23 | | | $ | 47.68 | |
|
Total Returnb | | | 6.38 | % | | | 20.74 | % | | | (18.37 | %) | | | 11.64 | % | | | (11.01 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 2,535 | | | $ | 1,782 | | | $ | 1,517 | | | $ | 2,245 | | | $ | 1,900 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.29 | % | | | 0.40 | % | | | (0.34 | %) | | | (1.07 | %) | | | (1.10 | %) |
Total expensesc | | | 2.00 | % | | | 1.83 | % | | | 1.72 | % | | | 1.73 | % | | | 1.69 | % |
Net expensesd | | | 1.96 | % | | | 1.82 | % | | | 1.72 | % | | | 1.73 | % | | | 1.69 | % |
Portfolio turnover rate | | | — | | | | 9 | % | | | — | | | | 142 | % | | | 376 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 46.91 | | | $ | 39.14 | | | $ | 48.32 | | | $ | 43.60 | | | $ | 51.55 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.16 | ) | | | (.15 | ) | | | (.48 | ) | | | (.82 | ) | | | (.85 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 2.78 | | | | 7.92 | | | | (8.70 | ) | | | 5.54 | | | | (4.93 | ) |
Total from investment operations | | | 2.62 | | | | 7.77 | | | | (9.18 | ) | | | 4.72 | | | | (5.78 | ) |
Less distributions from: |
Net investment income | | | (.45 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (2.17 | ) |
Total distributions | | | (.45 | ) | | | — | | | | — | | | | — | | | | (2.17 | ) |
Net asset value, end of period | | $ | 49.08 | | | $ | 46.91 | | | $ | 39.14 | | | $ | 48.32 | | | $ | 43.60 | |
|
Total Returnb | | | 5.62 | % | | | 19.85 | % | | | (18.98 | %) | | | 10.80 | % | | | (11.69 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 96 | | | $ | 791 | | | $ | 795 | | | $ | 1,309 | | | $ | 1,938 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.33 | %) | | | (0.33 | %) | | | (1.14 | %) | | | (1.80 | %) | | | (1.75 | %) |
Total expensesc | | | 2.77 | % | | | 2.59 | % | | | 2.47 | % | | | 2.48 | % | | | 2.45 | % |
Net expensesd | | | 2.72 | % | | | 2.58 | % | | | 2.47 | % | | | 2.48 | % | | | 2.45 | % |
Portfolio turnover rate | | | — | | | | 9 | % | | | — | | | | 142 | % | | | 376 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 52.25 | | | $ | 43.27 | | | $ | 53.03 | | | $ | 47.49 | | | $ | 55.53 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .12 | | | | .18 | | | | (.17 | ) | | | (.56 | ) | | | (.59 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 3.20 | | | | 8.80 | | | | (9.59 | ) | | | 6.10 | | | | (5.28 | ) |
Total from investment operations | | | 3.32 | | | | 8.98 | | | | (9.76 | ) | | | 5.54 | | | | (5.87 | ) |
Less distributions from: |
Net investment income | | | (.45 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (2.17 | ) |
Total distributions | | | (.45 | ) | | | — | | | | — | | | | — | | | | (2.17 | ) |
Net asset value, end of period | | $ | 55.12 | | | $ | 52.25 | | | $ | 43.27 | | | $ | 53.03 | | | $ | 47.49 | |
|
Total Return | | | 6.39 | % | | | 20.75 | % | | | (18.39 | %) | | | 11.64 | % | | | (11.00 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 10,549 | | | $ | 5,017 | | | $ | 6,301 | | | $ | 7,506 | | | $ | 10,608 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.22 | % | | | 0.36 | % | | | (0.36 | %) | | | (1.11 | %) | | | (1.12 | %) |
Total expensesc | | | 2.00 | % | | | 1.83 | % | | | 1.72 | % | | | 1.73 | % | | | 1.70 | % |
Net expensesd | | | 1.96 | % | | | 1.82 | % | | | 1.72 | % | | | 1.73 | % | | | 1.70 | % |
Portfolio turnover rate | | | — | | | | 9 | % | | | — | | | | 142 | % | | | 376 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
WEAKENING DOLLAR 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the inverse (opposite) of the performance of the U.S. Dollar Index® (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one year period ended March 31, 2020, Weakening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the underlying index. Weakening Dollar 2x Strategy Fund H-Class returned -8.98%, compared with a return of 1.82% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the values of the U.S. Dollar relative to the British Pound, Euro, and Canadian Dollar. The values of the U.S. Dollar relative to the Japanese Yen and Swiss Franc detracted the most from performance.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one year period ended March 31, 2020, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future result.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
| | THE RYDEX FUNDS ANNUAL REPORT | 85 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Inception Dates: |
A-Class | May 25, 2005 |
C-Class | May 25, 2005 |
H-Class | May 25, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) |
Guggenheim Ultra Short Duration Fund — Institutional Class | 10.9% |
Guggenheim Strategy Fund II | 10.5% |
Total | 21.4% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (8.94%) | (3.86%) | (6.01%) |
A-Class Shares with sales charge‡ | (13.27%) | (4.80%) | (6.47%) |
C-Class Shares | (9.65%) | (4.60%) | (6.71%) |
C-Class Shares with CDSC§ | (10.55%) | (4.60%) | (6.71%) |
H-Class Shares | (8.98%) | (3.88%) | (6.01%) |
U.S. Dollar Index | 1.82% | 0.14% | 2.02% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
86 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
WEAKENING DOLLAR 2x STRATEGY FUND | |
| | Shares | | | Value | |
MUTUAL FUNDS† - 21.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class1 | | | 17,470 | | | $ | 170,685 | |
Guggenheim Strategy Fund II1 | | | 6,870 | | | | 165,222 | |
Total Mutual Funds | | | | |
(Cost $343,024) | | | | | | | 335,907 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 58.1% |
Federal Farm Credit Bank |
0.38% (3 Month U.S. Treasury Bill Rate + 0.29%, Rate Floor: 0.00%) due 04/11/222 | | $ | 400,000 | | | | 399,346 | |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | | | 250,000 | | | | 250,551 | |
0.44% (U.S. Prime Rate - 2.81%, Rate Floor: 0.00%) due 05/20/222 | | | 60,000 | | | | 60,130 | |
Federal Home Loan Bank |
0.75% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 12/18/202 | | | 200,000 | | | | 200,042 | |
Total Federal Agency Notes | | | | |
(Cost $909,924) | | | | | | | 910,069 | |
U.S. TREASURY BILLS†† - 5.1% |
U.S. Treasury Bills |
0.50% due 04/30/203,4 | | | 80,000 | | | | 79,997 | |
Total U.S. Treasury Bills | | | | |
(Cost $79,968) | | | | | | | 79,997 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,5 - 26.2% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/206 | | | 296,019 | | | | 296,019 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/206 | | | 113,854 | | | | 113,854 | |
Total Repurchase Agreements | | | | |
(Cost $409,873) | | | | | | | 409,873 | |
| | | | | | | | | |
Total Investments - 110.8% | | | | |
(Cost $1,742,789) | | $ | 1,735,846 | |
Other Assets & Liabilities, net - (10.8)% | | | (169,770 | ) |
Total Net Assets - 100.0% | | $ | 1,566,076 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration Date | | | Notional
Amount | | | Value and
Unrealized
Depreciation** | |
Currency Futures Contracts Sold Short† |
U.S. Dollar Index Futures Contracts | | | 29 | | | | Jun 2020 | | | $ | 2,870,130 | | | $ | (32,589 | ) |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay
(Receive) | Payment
Frequency | | Maturity Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation | |
OTC Currency Index Swap Agreements Sold Short†† |
Goldman Sachs International | U.S. Dollar Index | N/A | At Maturity | | | 06/19/20 | | | | 3,007 | | | $ | 297,494 | | | $ | 3,173 | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as currency index swap collateral at March 31, 2020. |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
WEAKENING DOLLAR 2x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Mutual Funds | | $ | 335,907 | | | $ | — | | | $ | — | | | $ | 335,907 | |
Federal Agency Notes | | | — | | | | 910,069 | | | | — | | | | 910,069 | |
U.S. Treasury Bills | | | — | | | | 79,997 | | | | — | | | | 79,997 | |
Repurchase Agreements | | | — | | | | 409,873 | | | | — | | | | 409,873 | |
Currency Index Swap Agreements** | | | — | | | | 3,173 | | | | — | | | | 3,173 | |
Total Assets | | $ | 335,907 | | | $ | 1,403,112 | | | $ | — | | | $ | 1,739,019 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Currency Futures Contracts** | | $ | 32,589 | | | $ | — | | | $ | — | | | $ | 32,589 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 372,974 | | | $ | — | | | $ | (200,000 | ) | | $ | (4,047 | ) | | $ | (3,705 | ) | | $ | 165,222 | | | | 6,870 | | | $ | 10,083 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 274,635 | | | | — | | | | (100,000 | ) | | | (857 | ) | | | (3,093 | ) | | | 170,685 | | | | 17,470 | | | | 5,579 | |
| | | $ | 647,609 | | | $ | — | | | $ | (300,000 | ) | | $ | (4,904 | ) | | $ | (6,798 | ) | | $ | 335,907 | | | | | | | $ | 15,662 | |
88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
WEAKENING DOLLAR 2x STRATEGY FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments in unaffiliated issuers, at value (cost $989,892) | | $ | 990,066 | |
Investments in affiliated issuers, at value (cost $343,024) | | | 335,907 | |
Repurchase agreements, at value (cost $409,873) | | | 409,873 | |
Cash | | | 245,800 | |
Segregated cash with broker | | | 7,903 | |
Unrealized appreciation on OTC swap agreements | | | 3,173 | |
Receivables: |
Variation margin on futures contracts | | | 10,911 | |
Interest | | | 1,515 | |
Dividends | | | 887 | |
Fund shares sold | | | 340 | |
Total assets | | | 2,006,375 | |
| | | | | |
Liabilities: |
Payable for: |
Fund shares redeemed | | | 412,271 | |
Swap settlement | | | 17,928 | |
Management fees | | | 1,772 | |
Transfer agent and administrative fees | | | 670 | |
Distribution and service fees | | | 514 | |
Portfolio accounting fees | | | 202 | |
Trustees’ fees* | | | 59 | |
Miscellaneous | | | 6,883 | |
Total liabilities | | | 440,299 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 1,566,076 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 11,829,877 | |
Total distributable earnings (loss) | | | (10,263,801 | ) |
Net assets | | $ | 1,566,076 | |
| | | | | |
A-Class: |
Net assets | | $ | 237,381 | |
Capital shares outstanding | | | 4,103 | |
Net asset value per share | | $ | 57.85 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 60.73 | |
| | | | | |
C-Class: |
Net assets | | $ | 20,855 | |
Capital shares outstanding | | | 408 | |
Net asset value per share | | $ | 51.07 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,307,840 | |
Capital shares outstanding | | | 22,641 | |
Net asset value per share | | $ | 57.76 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends from securities of affiliated issuers | | $ | 15,662 | |
Interest | | | 48,515 | |
Total investment income | | | 64,177 | |
| | | | | |
Expenses: |
Management fees | | | 27,446 | |
Distribution and service fees: |
A-Class | | | 933 | |
C-Class | | | 240 | |
H-Class | | | 6,631 | |
Transfer agent and administrative fees | | | 7,790 | |
Licensing fees | | | 6,517 | |
Portfolio accounting fees | | | 3,049 | |
Professional fees | | | 1,428 | |
Trustees’ fees* | | | 666 | |
Custodian fees | | | 428 | |
Miscellaneous | | | 5,712 | |
Total expenses | | | 60,840 | |
Less: |
Expenses waived by Adviser | | | (575 | ) |
Net expenses | | | 60,265 | |
Net investment income | | | 3,912 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments in affiliated issuers | | | (4,904 | ) |
Swap agreements | | | (54,229 | ) |
Futures contracts | | | (189,507 | ) |
Net realized loss | | | (248,640 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | 387 | |
Investments in affiliated issuers | | | (6,798 | ) |
Swap agreements | | | 4,783 | |
Futures contracts | | | (2,825 | ) |
Net change in unrealized appreciation (depreciation) | | | (4,453 | ) |
Net realized and unrealized loss | | | (253,093 | ) |
Net decrease in net assets resulting from operations | | $ | (249,181 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
WEAKENING DOLLAR 2x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 3,912 | | | $ | 14,570 | |
Net realized loss on investments | | | (248,640 | ) | | | (946,169 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (4,453 | ) | | | (32,206 | ) |
Net decrease in net assets resulting from operations | | | (249,181 | ) | | | (963,805 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (981 | ) | | | — | |
C-Class | | | (86 | ) | | | — | |
H-Class | | | (11,434 | ) | | | — | |
Total distributions to shareholders | | | (12,501 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 3,412,501 | | | | 3,191,819 | |
C-Class | | | 5,000 | | | | 2,409,633 | |
H-Class | | | 34,836,156 | | | | 36,403,192 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 918 | | | | — | |
C-Class | | | 86 | | | | — | |
H-Class | | | 11,032 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (3,440,177 | ) | | | (6,106,598 | ) |
C-Class | | | (17,656 | ) | | | (2,691,925 | ) |
H-Class | | | (34,990,291 | ) | | | (37,192,749 | ) |
Net decrease from capital share transactions | | | (182,431 | ) | | | (3,986,628 | ) |
Net decrease in net assets | | | (444,113 | ) | | | (4,950,433 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 2,010,189 | | | | 6,960,622 | |
End of year | | $ | 1,566,076 | | | $ | 2,010,189 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 54,128 | | | | 45,113 | |
C-Class | | | 99 | | | | 37,258 | |
H-Class | | | 565,225 | | | | 534,605 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 15 | | | | — | |
C-Class | | | 2 | | | | — | |
H-Class | | | 179 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (54,689 | ) | | | (83,033 | ) |
C-Class | | | (320 | ) | | | (42,196 | ) |
H-Class | | | (569,120 | ) | | | (550,347 | ) |
Net decrease in shares | | | (4,481 | ) | | | (58,600 | ) |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
WEAKENING DOLLAR 2x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 63.74 | | | $ | 77.67 | | | $ | 64.99 | | | $ | 75.31 | | | $ | 70.69 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .16 | | | | .23 | | | | (.35 | ) | | | (.80 | ) | | | (.84 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (5.84 | ) | | | (14.16 | ) | | | 13.03 | | | | (9.52 | ) | | | 5.46 | |
Total from investment operations | | | (5.68 | ) | | | (13.93 | ) | | | 12.68 | | | | (10.32 | ) | | | 4.62 | |
Less distributions from: |
Net investment income | | | (.21 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.21 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 57.85 | | | $ | 63.74 | | | $ | 77.67 | | | $ | 64.99 | | | $ | 75.31 | |
|
Total Returnb | | | (8.94 | %) | | | (17.93 | %) | | | 19.51 | % | | | (13.69 | %) | | | 6.54 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 237 | | | $ | 296 | | | $ | 3,306 | | | $ | 324 | | | $ | 1,314 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.26 | % | | | 0.32 | % | | | (0.48 | %) | | | (1.13 | %) | | | (1.13 | %) |
Total expensesc | | | 2.01 | % | | | 1.80 | % | | | 1.72 | % | | | 1.72 | % | | | 1.70 | % |
Net expensesd | | | 2.00 | % | | | 1.80 | % | | | 1.72 | % | | | 1.72 | % | | | 1.70 | % |
Portfolio turnover rate | | | — | | | | — | | | | 28 | % | | | 77 | % | | | 699 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 56.74 | | | $ | 69.66 | | | $ | 58.72 | | | $ | 68.57 | | | $ | 64.88 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.29 | ) | | | (.27 | ) | | | (.80 | ) | | | (1.19 | ) | | | (1.20 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (5.17 | ) | | | (12.65 | ) | | | 11.74 | | | | (8.66 | ) | | | 4.89 | |
Total from investment operations | | | (5.46 | ) | | | (12.92 | ) | | | 10.94 | | | | (9.85 | ) | | | 3.69 | |
Less distributions from: |
Net investment income | | | (.21 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.21 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 51.07 | | | $ | 56.74 | | | $ | 69.66 | | | $ | 58.72 | | | $ | 68.57 | |
|
Total Returnb | | | (9.65 | %) | | | (18.55 | %) | | | 18.65 | % | | | (14.39 | %) | | | 5.74 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 21 | | | $ | 36 | | | $ | 388 | | | $ | 695 | | | $ | 536 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.53 | %) | | | (0.42 | %) | | | (1.23 | %) | | | (1.88 | %) | | | (1.81 | %) |
Total expensesc | | | 2.75 | % | | | 2.53 | % | | | 2.47 | % | | | 2.47 | % | | | 2.45 | % |
Net expensesd | | | 2.73 | % | | | 2.53 | % | | | 2.47 | % | | | 2.47 | % | | | 2.45 | % |
Portfolio turnover rate | | | — | | | | — | | | | 28 | % | | | 77 | % | | | 699 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
WEAKENING DOLLAR 2x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017e | | | Year Ended
March 31,
2016e | |
Per Share Data |
Net asset value, beginning of period | | $ | 63.67 | | | $ | 77.60 | | | $ | 64.92 | | | $ | 75.23 | | | $ | 70.59 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .07 | | | | .28 | | | | (.36 | ) | | | (.85 | ) | | | (.78 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (5.77 | ) | | | (14.21 | ) | | | 13.04 | | | | (9.46 | ) | | | 5.42 | |
Total from investment operations | | | (5.70 | ) | | | (13.93 | ) | | | 12.68 | | | | (10.31 | ) | | | 4.64 | |
Less distributions from: |
Net investment income | | | (.21 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.21 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 57.76 | | | $ | 63.67 | | | $ | 77.60 | | | $ | 64.92 | | | $ | 75.23 | |
|
Total Return | | | (8.98 | %) | | | (17.95 | %) | | | 19.55 | % | | | (13.73 | %) | | | 6.54 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,308 | | | $ | 1,678 | | | $ | 3,267 | | | $ | 5,068 | | | $ | 3,645 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.12 | % | | | 0.41 | % | | | (0.49 | %) | | | (1.19 | %) | | | (1.04 | %) |
Total expensesc | | | 1.99 | % | | | 1.83 | % | | | 1.72 | % | | | 1.71 | % | | | 1.70 | % |
Net expensesd | | | 1.97 | % | | | 1.83 | % | | | 1.72 | % | | | 1.71 | % | | | 1.70 | % |
Portfolio turnover rate | | | — | | | | — | | | | 28 | % | | | 77 | % | | | 699 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the years presented through March 31, 2017 have been restated to reflect a 1:6 reverse share split effective October 28, 2016. |
92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of seven separate classes of shares: Investor Class shares, A-Class shares, C-Class shares, H-Class shares, P-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. C-Class shares of each Fund automatically convert to A-Class shares of the same Fund on or about the 10th day of the month following the 10-year anniversary of the purchase of the C-Class shares. This conversion will be executed without any sales charge, fee or other charge. After the conversion is completed, the shares will be subject to all features and expenses of A-Class shares. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares require a minimum initial investment of $2 million and a minimum account balance of $1 million. At March 31, 2020, the Trust consisted of fifty-two funds.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment
Company Type |
S&P 500® Pure Growth Fund | Non-diversified |
S&P 500® Pure Value Fund | Non-diversified |
S&P MidCap 400® Pure Growth Fund | Non-diversified |
S&P MidCap 400® Pure Value Fund | Non-diversified |
S&P SmallCap 600® Pure Growth Fund | Non-diversified |
S&P SmallCap 600® Pure Value Fund | Non-diversified |
Europe 1.25x Strategy Fund | Non-diversified |
Japan 2x Strategy Fund | Non-diversified |
Strengthening Dollar 2x Strategy Fund | Non-diversified |
Weakening Dollar 2x Strategy Fund | Non-diversified |
At March 31, 2020, only A-Class, C-Class, and H-Class shares have been issued by the Funds.
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The NAV of each Class of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, attributable to the Class by the number of outstanding shares of the Class.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
| | THE RYDEX FUNDS ANNUAL REPORT | 93 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date.
U.S. Government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The value of currency index swap agreements entered into by a fund is accounted for using the unrealized appreciation or depreciation on the agreements that is determined by marking the agreements to the broker quote.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis.
In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
94 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
(d) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(e) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain or loss and unrealized appreciation or depreciation on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized appreciation and depreciation arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(f) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of March 31, 2020, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(g) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(h) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares, unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(i) Class Allocations
Interest and dividend income, most expenses, all realized gains and losses, and all unrealized appreciation and depreciation are allocated to the classes based upon the value of the outstanding shares in each Class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust based on the respective net assets of each Fund included in the Trust.
| | THE RYDEX FUNDS ANNUAL REPORT | 95 |
NOTES TO FINANCIAL STATEMENTS (continued) |
(j) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.08% at March 31, 2020.
(k) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Derivatives
As part of their investment strategy, the Funds utilize a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized in the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
96 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table represents the Funds’ use and volume of futures on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Long | | | Short | |
Europe 1.25x Strategy Fund | Index exposure, Leverage, Liquidity | | $ | 19,254,314 | | | $ | — | |
Japan 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | 7,526,627 | | | | — | |
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | 13,492,939 | | | | — | |
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | — | | | | 4,944,009 | |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing over-the-counter (“OTC”) swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Currency swaps enable the Funds to gain exposure to currencies in a market without actually possessing a given currency, or to hedge a position. Currency swaps involve the exchange of the principal and interest in one currency for the principal and interest in another currency. As in other types of OTC swaps, the Funds may be at risk due to the counterparty’s inability to perform.
The following table represents the Funds’ use and volume of currency swaps on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Long | | | Short | |
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | | $ | 2,157,132 | | | $ | — | |
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | — | | | | 874,892 | |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of March 31, 2020:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency contracts | Variation margin on futures contracts | Variation margin on futures contracts |
Currency contracts | Unrealized appreciation on OTC swap agreements | |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at March 31, 2020:
Asset Derivative Investments Value |
Fund | | Futures
Equity
Risk* | | | Futures
Foreign
Currency
Exchange
Risk* | | | Swaps
Currency
Risk | | | Total Value at
March 31,
2020 | |
Europe 1.25x Strategy Fund | | $ | 160,993 | | | $ | — | | | $ | — | | | $ | 160,993 | |
Japan 2x Strategy Fund | | | — | | | | 29,735 | | | | — | | | | 29,735 | |
Strengthening Dollar 2x Strategy Fund | | | — | | | | 213,600 | | | | 55,165 | | | | 268,765 | |
Weakening Dollar 2x Strategy Fund | | | — | | | | — | | | | 3,173 | | | | 3,173 | |
| | THE RYDEX FUNDS ANNUAL REPORT | 97 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Liability Derivative Investments Value |
Fund | | Futures
Equity
Risk* | | | Futures
Foreign
Currency
Exchange
Risk* | | | Swaps
Currency
Risk | | | Total Value at
March 31,
2020 | |
Europe 1.25x Strategy Fund | | $ | — | | | $ | 16,004 | | | $ | — | | | $ | 16,004 | |
Japan 2x Strategy Fund | | | 52,426 | | | | — | | | | — | | | | 52,426 | |
Weakening Dollar 2x Strategy Fund | | | — | | | | 32,589 | | | | — | | | | 32,589 | |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. For exchange-traded and centrally cleared derivatives, variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended March 31, 2020:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Currency contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
Currency contracts | Net realized gain (loss) on swap agreements |
| Net change in unrealized appreciation (depreciation) on swap agreements |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended March 31, 2020:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations |
Fund | | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Futures
Foreign
Currency
Exchange
Risk | | | Swaps
Currency
Risk | | | Total | |
Europe 1.25x Strategy Fund | | $ | 509,216 | | | $ | — | | | $ | (594,731 | ) | | $ | — | | | $ | (85,515 | ) |
Japan 2x Strategy Fund | | | (567,294 | ) | | | — | | | | 191,276 | | | | — | | | | (376,018 | ) |
Strengthening Dollar 2x Strategy Fund | | | — | | | | — | | | | (50,465 | ) | | | (13,409 | ) | | | (63,874 | ) |
Weakening Dollar 2x Strategy Fund | | | — | | | | — | | | | (189,507 | ) | | | (54,229 | ) | | | (243,736 | ) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations |
Fund | | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Futures
Foreign
Currency
Exchange
Risk | | | Swaps
Currency
Risk | | | Total | |
Europe 1.25x Strategy Fund | | $ | 41,569 | | | $ | — | | | $ | 43,819 | | | $ | — | | | $ | 85,388 | |
Japan 2x Strategy Fund | | | (22,095 | ) | | | — | | | | 20,312 | | | | — | | | | (1,783 | ) |
Strengthening Dollar 2x Strategy Fund | | | — | | | | — | | | | 102,745 | | | | 46,386 | | | | 149,131 | |
Weakening Dollar 2x Strategy Fund | | | — | | | | — | | | | (2,825 | ) | | | 4,783 | | | | 1,958 | |
In conjunction with the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
98 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
| | | | | | | | | | | | | | | | Gross Amounts Not Offset
in the Statements of
Assets and Liabilities | | | | | |
Fund | Instrument | | Gross
Amounts of
Recognized
Assets1 | | | Gross
Amounts
Offset in the
Statements
of Assets and
Liabilities | | | Net Amount
of Assets
Presented on
the Statements
of Assets and
Liabilities | | | Financial
Instruments | | | Cash
Collateral
Received | | | Net
Amount | |
Strengthening Dollar 2x Strategy Fund | Swap currency contracts | | $ | 55,165 | | | $ | — | | | $ | 55,165 | | | $ | — | | | $ | — | | | $ | 55,165 | |
Weakening Dollar 2x Strategy Fund | Swap currency contracts | | | 3,173 | | | | — | | | | 3,173 | | | | — | | | | — | | | | 3,173 | |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
| | THE RYDEX FUNDS ANNUAL REPORT | 99 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of March 31, 2020.
Fund | Counterparty | Asset Type | | Cash Pledged | | | Cash Received | |
Europe 1.25x Strategy Fund | Goldman Sachs International | Futures contracts | | $ | 286,032 | | | $ | — | |
Japan 2x Strategy Fund | Goldman Sachs International | Futures contracts | | | 35,275 | | | | — | |
Strengthening Dollar 2x Strategy Fund | Goldman Sachs International | Futures contracts | | | 352,740 | | | | — | |
Weakening Dollar 2x Strategy Fund | Goldman Sachs International | Futures contracts | | | 7,903 | | | | — | |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | | Management Fees
(as a % of Net Assets) | |
S&P 500® Pure Growth Fund | | | 0.75 | % |
S&P 500® Pure Value Fund | | | 0.75 | % |
S&P MidCap 400® Pure Growth Fund | | | 0.75 | % |
S&P MidCap 400® Pure Value Fund | | | 0.75 | % |
S&P SmallCap 600® Pure Growth Fund | | | 0.75 | % |
S&P SmallCap 600® Pure Value Fund | | | 0.75 | % |
Europe 1.25x Strategy Fund | | | 0.90 | % |
Japan 2x Strategy Fund | | | 0.75 | % |
Strengthening Dollar 2x Strategy Fund | | | 0.90 | % |
Weakening Dollar 2x Strategy Fund | | | 0.90 | % |
100 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
When the aggregate assets of each series of the Trust (excluding the Long Short Equity Fund, Managed Futures Strategy Fund and Multi-Hedge Strategies Fund) and each series of Rydex Dynamic Funds equal or exceed $10 billion, the advisory fee rate paid by each individual Fund will be reduced in accordance with the asset level and breakpoint schedule set forth below.
Fund Assets Under Management | Fund Asset-Based
Breakpoint Reductions |
$500 million – $1 billion | 0.025% |
> $1 billion – $2 billion | 0.05% |
> $2 billion | 0.075% |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted a Distribution Plan applicable to A-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Funds will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services.
The Board has adopted a separate Distribution and Shareholder Services Plan applicable to C-Class shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates a shareholder’s financial adviser for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial adviser an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial adviser. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2020, GFD retained sales charges of $122,345 relating to sales of A-Class shares of the Trust.
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. Fee waivers will be calculated at the investing Fund level without regard to any expense cap in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended March 31, 2020, the following Funds waived fees related to investments in affiliated funds:
Fund | | Amount Waived | |
Europe 1.25x Strategy Fund | | $ | 3,356 | |
Japan 2x Strategy Fund | | | 1,043 | |
Strengthening Dollar 2x Strategy Fund | | | 3,338 | |
Weakening Dollar 2x Strategy Fund | | | 575 | |
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
| | THE RYDEX FUNDS ANNUAL REPORT | 101 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At March 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and
Terms of Agreement | | Face Value | | | Repurchase Price | | | Collateral | | Par Value | | | Fair Value | |
J.P. Morgan Securities LLC | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.01% | | | | | | | | | | 2.00% | | | | | | | | |
Due 04/01/20 | | $ | 129,371,353 | | | $ | 129,371,389 | | | 11/30/22 | | $ | 125,405,900 | | | $ | 131,958,818 | |
| | | | | | | | | | | | | | | | | | | |
BofA Securities, Inc. | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.00% | | | | | | | | | | 2.13% | | | | | | | | |
Due 04/01/20 | | | 49,758,213 | | | | 49,758,213 | | | 08/15/21 | | | 49,322,100 | | | | 50,753,381 | |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
102 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
At March 31, 2020, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
| | | Gross Amounts Not Offset in the
Statements of Assets and Liabilities | | | | Securities Lending Collateral | |
Fund | | Value of
Securities
Loaned | | | Collateral
Received(a) | | | Net
Amount | | | | Cash
Collateral
Invested | | | Cash
Collateral
Uninvested | | | Total
Collateral | |
S&P 500® Pure Value Fund | | $ | 191,609 | | | $ | (191,609 | ) | | $ | — | | | | $ | 203,849 | | | $ | — | | | $ | 203,849 | |
S&P MidCap 400® Pure Growth Fund | | | 803,754 | | | | (803,754 | ) | | | — | | | | | 809,443 | | | | — | | | | 809,443 | |
S&P MidCap 400® Pure Value Fund | | | 101,082 | | | | (101,082 | ) | | | — | | | | | 105,657 | | | | — | | | | 105,657 | |
S&P SmallCap 600® Pure Growth Fund | | | 82,725 | | | | (82,725 | ) | | | — | | | | | 91,576 | | | | — | | | | 91,576 | |
S&P SmallCap 600® Pure Value Fund | | | 91,270 | | | | (91,270 | ) | | | — | | | | | 93,624 | | | | — | | | | 93,624 | |
Europe 1.25x Strategy Fund | | | 20,492 | | | | (20,492 | ) | | | — | | | | | 21,155 | | | | — | | | | 21,155 | |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended March 31, 2020 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
S&P 500® Pure Growth Fund | | $ | — | | | $ | 4,523,222 | | | $ | 4,523,222 | |
S&P 500® Pure Value Fund | | | 415,316 | | | | — | | | | 415,316 | |
Europe 1.25x Strategy Fund | | | 61,418 | | | | — | | | | 61,418 | |
Japan 2x Strategy Fund | �� | | 20,310 | | | | — | | | | 20,310 | |
Strengthening Dollar 2x Strategy Fund | | | 45,595 | | | | — | | | | 45,595 | |
Weakening Dollar 2x Strategy Fund | | | 12,501 | | | | — | | | | 12,501 | |
| | THE RYDEX FUNDS ANNUAL REPORT | 103 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended March 31, 2019 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
S&P 500® Pure Growth Fund | | $ | 5,662,743 | | | $ | 32 | | | $ | 5,662,775 | |
S&P 500® Pure Value Fund | | | 4,196,633 | | | | 579,006 | | | | 4,775,639 | |
S&P MidCap 400® Pure Growth Fund | | | 4,944,925 | | | | 4,093,832 | | | | 9,038,757 | |
S&P MidCap 400® Pure Value Fund | | | 286,553 | | | | — | | | | 286,553 | |
S&P SmallCap 600® Pure Growth Fund | | | 231,789 | | | | 953,524 | | | | 1,185,313 | |
Europe 1.25x Strategy Fund | | | 155,680 | | | | — | | | | 155,680 | |
Japan 2x Strategy Fund | | | 13,094 | | | | — | | | | 13,094 | |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of March 31, 2020 were as follows:
Fund | | Undistributed
Ordinary
Income | | | Undistributed
Long-Term
Capital Gain | | | Net Unrealized
Appreciation
(Depreciation) | | | Accumulated
Capital and
Other Losses | | | Total | |
S&P 500® Pure Growth Fund | | $ | 1,666,873 | | | $ | — | | | $ | (6,187,991 | ) | | $ | — | | | $ | (4,521,118 | ) |
S&P 500® Pure Value Fund | | | 158,332 | | | | — | | | | (6,148,634 | ) | | | (3,174,438 | ) | | | (9,164,740 | ) |
S&P MidCap 400® Pure Growth Fund | | | — | | | | — | | | | (9,590,096 | ) | | | (1,990,791 | ) | | | (11,580,887 | ) |
S&P MidCap 400® Pure Value Fund | | | — | | | | — | | | | (2,195,358 | ) | | | (1,505,937 | ) | | | (3,701,295 | ) |
S&P SmallCap 600® Pure Growth Fund | | | — | | | | — | | | | (1,592,527 | ) | | | (1,338,022 | ) | | | (2,930,549 | ) |
S&P SmallCap 600® Pure Value Fund | | | — | | | | — | | | | (2,318,104 | ) | | | (6,156,007 | ) | | | (8,474,111 | ) |
Europe 1.25x Strategy Fund | | | 68,173 | | | | — | | | | (21,545 | ) | | | (438,521 | ) | | | (391,893 | ) |
Japan 2x Strategy Fund | | | 14,233 | | | | — | | | | (7,963 | ) | | | (2,859,843 | ) | | | (2,853,573 | ) |
Strengthening Dollar 2x Strategy Fund | | | 17,189 | | | | — | | | | (65,198 | ) | | | (18,526,252 | ) | | | (18,574,261 | ) |
Weakening Dollar 2x Strategy Fund | | | 3,912 | | | | — | | | | (7,061 | ) | | | (10,260,652 | ) | | | (10,263,801 | ) |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. Under the RIC Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. As of March 31, 2020, capital loss carryforwards for the Funds were as follows:
| | | Unlimited | | | | | |
Fund | | Short-Term | | | Long-Term | | | Total
Capital Loss
Carryforward | |
S&P MidCap 400® Pure Growth Fund | | $ | (1,990,791 | ) | | $ | — | | | $ | (1,990,791 | ) |
S&P SmallCap 600® Pure Growth Fund | | | (1,312,703 | ) | | | — | | | | (1,312,703 | ) |
S&P SmallCap 600® Pure Value Fund | | | (4,624,790 | ) | | | (1,506,352 | ) | | | (6,131,142 | ) |
Europe 1.25x Strategy Fund | | | (232,957 | ) | | | (205,564 | ) | | | (438,521 | ) |
Japan 2x Strategy Fund | | | (821,460 | ) | | | (2,038,383 | ) | | | (2,859,843 | ) |
Strengthening Dollar 2x Strategy Fund | | | (7,465,355 | ) | | | (11,060,897 | ) | | | (18,526,252 | ) |
Weakening Dollar 2x Strategy Fund | | | (4,116,816 | ) | | | (6,143,836 | ) | | | (10,260,652 | ) |
For the year ended March 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | | Utilized | |
S&P MidCap 400® Pure Value Fund | | $ | 901,796 | |
S&P SmallCap 600® Pure Value Fund | | | 73,082 | |
Europe 1.25x Strategy Fund | | | 155,841 | |
Strengthening Dollar 2x Strategy Fund | | | 84,230 | |
104 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, foreign currency gains and losses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, and the “mark-to-market” of certain derivatives. Additional differences may result from the tax treatment of net operating losses. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of March 31, 2020 for permanent book/tax differences:
Fund | | Paid In
Capital | | | Total
Distributable
Earnings/(Loss) | |
S&P 500® Pure Growth Fund | | $ | 15,621,394 | | | $ | (15,621,394 | ) |
S&P 500® Pure Value Fund | | | 1,948,960 | | | | (1,948,960 | ) |
S&P MidCap 400® Pure Growth Fund | | | (417,707 | ) | | | 417,707 | |
S&P MidCap 400® Pure Value Fund | | | 479,876 | | | | (479,876 | ) |
S&P SmallCap 600® Pure Growth Fund | | | (84,938 | ) | | | 84,938 | |
S&P SmallCap 600® Pure Value Fund | | | (27,593 | ) | | | 27,593 | |
At March 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | | Tax
Cost | | | Tax
Unrealized
Appreciation | | | Tax
Unrealized
Depreciation | | | Net Unrealized
Appreciation/
(Depreciation) | |
S&P 500® Pure Growth Fund | | $ | 45,953,516 | | | $ | 2,451,360 | | | $ | (8,639,351 | ) | | $ | (6,187,991 | ) |
S&P 500® Pure Value Fund | | | 14,818,726 | | | | 65,215 | | | | (6,213,849 | ) | | | (6,148,634 | ) |
S&P MidCap 400® Pure Growth Fund | | | 46,755,195 | | | | 1,744,274 | | | | (11,334,370 | ) | | | (9,590,096 | ) |
S&P MidCap 400® Pure Value Fund | | | 5,365,928 | | | | — | | | | (2,195,358 | ) | | | (2,195,358 | ) |
S&P SmallCap 600® Pure Growth Fund | | | 5,955,567 | | | | 160,742 | | | | (1,753,269 | ) | | | (1,592,527 | ) |
S&P SmallCap 600® Pure Value Fund | | | 5,427,551 | | | | — | | | | (2,318,104 | ) | | | (2,318,104 | ) |
Europe 1.25x Strategy Fund | | | 1,497,309 | | | | 47,990 | | | | (69,834 | ) | | | (21,844 | ) |
Japan 2x Strategy Fund | | | 845,782 | | | | 38,217 | | | | (46,180 | ) | | | (7,963 | ) |
Strengthening Dollar 2x Strategy Fund | | | 8,985,215 | | | | 1,580 | | | | (66,778 | ) | | | (65,198 | ) |
Weakening Dollar 2x Strategy Fund | | | 1,742,907 | | | | 6,600 | | | | (13,661 | ) | | | (7,061 | ) |
Pursuant to U.S. federal income tax regulations applicable to regulated investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2020, the following losses reflected in the accompanying financial statements were deferred for U.S. federal income tax purposes until April 1, 2020:
Fund | | Ordinary | | | Capital | |
S&P 500® Pure Value Fund | | $ | — | | | $ | (3,174,438 | ) |
S&P MidCap 400® Pure Value Fund | | | — | | | | (1,505,937 | ) |
S&P SmallCap 600® Pure Growth Fund | | | (25,319 | ) | | | — | |
S&P SmallCap 600® Pure Value Fund | | | (24,865 | ) | | | — | |
| | THE RYDEX FUNDS ANNUAL REPORT | 105 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Securities Transactions
For the year ended March 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | | Purchases | | | Sales | |
S&P 500® Pure Growth Fund | | $ | 250,252,063 | | | $ | 313,881,563 | |
S&P 500® Pure Value Fund | | | 106,937,528 | | | | 140,123,845 | |
S&P MidCap 400® Pure Growth Fund | | | 97,041,187 | | | | 114,854,448 | |
S&P MidCap 400® Pure Value Fund | | | 143,440,614 | | | | 151,792,454 | |
S&P SmallCap 600® Pure Growth Fund | | | 62,534,526 | | | | 66,155,014 | |
S&P SmallCap 600® Pure Value Fund | | | 128,006,640 | | | | 134,219,691 | |
Europe 1.25x Strategy Fund | | | 118,056,212 | | | | 136,781,804 | |
Japan 2x Strategy Fund | | | — | | | | 770,000 | |
Strengthening Dollar 2x Strategy Fund | | | — | | | | 400,000 | |
Weakening Dollar 2x Strategy Fund | | | — | | | | 300,000 | |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended March 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | | Purchases | | | Sales | | | Realized Gain | |
S&P 500® Pure Growth Fund | | $ | 33,309,492 | | | $ | 53,462,593 | | | $ | 2,354,079 | |
S&P 500® Pure Value Fund | | | 12,178,562 | | | | 26,970,645 | | | | 542,117 | |
S&P MidCap 400® Pure Growth Fund | | | 5,719,685 | | | | 6,205,601 | | | | 353,239 | |
S&P MidCap 400® Pure Value Fund | | | 7,172,751 | | | | 6,807,080 | | | | 369,224 | |
S&P SmallCap 600® Pure Growth Fund | | | 2,372,905 | | | | 1,488,428 | | | | 236,042 | |
S&P SmallCap 600® Pure Value Fund | | | 2,592,899 | | | | 3,018,881 | | | | 532,267 | |
Europe 1.25x Strategy Fund | | | 1,856,453 | | | | 1,343,375 | | | | 77,268 | |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 3.02% for the year ended March 31, 2020. The Funds did not have any borrowings outstanding under this agreement at March 31, 2020.
The average daily balances borrowed for the year ended March 31, 2020, were as follows:
Fund | | Average Daily Balance | |
S&P 500® Pure Growth Fund | | $ | 3,098 | |
S&P 500® Pure Value Fund | | | 500 | |
S&P MidCap 400® Pure Growth Fund | | | 1,869 | |
S&P MidCap 400® Pure Value Fund | | | 880 | |
S&P SmallCap 600® Pure Growth Fund | | | 620 | |
S&P SmallCap 600® Pure Value Fund | | | 10,123 | |
Europe 1.25x Strategy Fund | | | 126 | |
Japan 2x Strategy Fund | | | 344 | |
Strengthening Dollar 2x Strategy Fund | | | 617 | |
Weakening Dollar 2x Strategy Fund | | | 3 | |
106 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 11 – Legal Proceedings
Tribune Company
Rydex Series Funds has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Series Funds of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Series Funds, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments.
On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The plaintiff requested that the Court direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
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NOTES TO FINANCIAL STATEMENTS (concluded) |
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 12 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 13 – Subsequent Events
Share Splits
On May 18, 2020, the Board approved reverse share splits as follows:
Fund | Effective Date | Split Type |
S&P SmallCap 600® Pure Value Fund | August 14, 2020 | One-for-Five Reverse Split |
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events other than the one disclosed above, that would require adjustment to or disclosure in the Funds’ financial statements.
108 | THE RYDEX FUNDS ANNUAL REPORT | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P MidCap 400® Pure Growth Fund, S&P MidCap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund and the Board of Trustees of Rydex Series Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P MidCap 400® Pure Growth Fund, S&P MidCap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund (collectively referred to as the “Funds”), (ten of the funds constituting Rydex Series Funds (the “Trust”)), including the schedules of investments, as of March 31, 2020, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (ten of the funds constituting Rydex Series Funds) at March 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
May 28, 2020
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OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2020, the following funds had the corresponding percentages qualify for the reduced tax rate pursuant to the Jobs and Growth Tax Relief and Reconciliation Act of 2003 or for the dividends received deduction for corporations. See the qualified dividend income and dividend received deduction columns, respectively, in the table below.
Fund | Qualified
Dividend
Income | Dividend
Received
Deduction |
S&P 500® Pure Value Fund | 86.92% | 57.70% |
Europe 1.25x Strategy Fund | 100.00% | 0.00% |
With respect to the taxable year ended March 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | | From long-term
capital gain: | | | From long-term
capital gain, using
proceeds from
shareholder
redemptions: | |
S&P 500® Pure Growth Fund | | $ | 4,523,222 | | | $ | 8,203,222 | |
S&P 500® Pure Value Fund | | | — | | | | 906,071 | |
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and N-Q may be reviewed and copied
110 | THE RYDEX FUNDS ANNUAL REPORT | |
OTHER INFORMATION (Unaudited)(concluded) |
at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES | | | |
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present). Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present). Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present). Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present). Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 | Current: Retired Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present). Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chair of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chair of the Contracts Review Committee | Since 2005 (Trustee) Since 2019
(Vice Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present). Former: Harvest Volatility Edge Trust (3) (2017-2019). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES - concluded | | | |
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present). Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018-present); Edward-Elmhurst Healthcare System (2012-present). Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019
(Chair of the Audit Committee) | Current: Retired. Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present). Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INTERESTED TRUSTEE | | | | |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019
(Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present). Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the
Predecessor Corporation. |
*** | Each Trustee also serves on the boards of trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Managed Duration Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Funds and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the board of trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS | | | |
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present). Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present). Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present). Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present). Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS - concluded | | |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present). Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present). Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
116 | THE RYDEX FUNDS ANNUAL REPORT | |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
| | ● | We use your information in connection with servicing your accounts. |
| | ● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
| | ● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
| | ● | We use information for security purposes. We may use your information to protect our company and our customers. |
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| | THE RYDEX FUNDS ANNUAL REPORT | 117 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
| | ● | We use information as otherwise permitted by law, as we may notify you. |
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We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
118 | THE RYDEX FUNDS ANNUAL REPORT | |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
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If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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3.31.2020
Rydex Funds Annual Report
Domestic Equity Fund |
NASDAQ-100® Fund | | |
Beginning on January 1, 2021, paper copies of the Fund’s annual and semi-annual shareholder reports may no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from a fund electronically by calling 800.820.0888, going toGuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a fund directly, you can inform the Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | ROTC-ANN-2-0320x0321 |
| | |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 6 |
NASDAQ-100® FUND | 9 |
NOTES TO FINANCIAL STATEMENTS | 27 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 47 |
OTHER INFORMATION | 49 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 51 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 59 |
| | THE RYDEX FUNDS ANNUAL REPORT | 1 |
Dear Shareholder:
The fiscal year ended March 31, 2020, concluded on a somber note. Even though markets performed well for most of the period, the emergence of a novel and highly contagious form of coronavirus in the last weeks of the period adversely impacted global commercial activity and contributed to significant volatility in certain markets, unseen since the great recession of 2008.
As it spread beyond Asia to virtually every country in the world, many governments and businesses instituted quarantines and closures, which has resulted in significant disruption in manufacturing, supply chains, consumer demand and economic activity. The U.S. Federal Reserve responded quickly to provide liquidity in order to ensure that the U.S. markets continued to function efficiently. The fiscal policy included a spending bill worth over $2 trillion to assist consumers, states, small businesses and certain industries. While these actions helped stabilize the market, volatile conditions continued into April.
As discussed in this annual shareholder report, these events have affected performance of the Nasdaq-100 Fund (the “Fund”). We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for the Fund.
Security Investors, LLC (the “Investment Adviser”), the Investment Adviser for the Fund, is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm. An affiliate of Guggenheim and the Investment Adviser, Guggenheim Funds Distributors, LLC, is the distributor of the Fund.
Together, we are committed to the safety and prosperity of our clients, our employees, and our shareholders. The resources of the firm are being made fully available not only to support our clients, but also to support our employees and their families.
Please practice the appropriate prudence for the protection not only of your health and that of your friends and loved ones but also for our neighbors and communities. Thank you for the trust you place in us.
Sincerely,
Security Investors, LLC
April 30, 2020
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses, and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
2 | THE RYDEX FUNDS ANNUAL REPORT | |
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/ or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Fund’s investments and a shareholder’s investment in the Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Fund, the Fund, its service providers, the markets in which it invests and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
The Nasdaq-100® Fund may not be suitable for all investors. ● Investing in the NASDAQ-100® Fund involves certain risks, which may include increased volatility due to the use of futures and the possibility that companies in which the Fund invests may not be commercially successful or may become obsolete more quickly. ● There are no assurances that any Rydex Fund will achieve its objective and/or strategy. This Fund is subject to active trading and tracking error risks, which may increase volatility, impact the Fund’s ability to achieve its investment objective and may decrease the Fund’s performance. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. ● For more on these and other risks, please read the prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW(Unaudited) | March 31, 2020 |
The 12-month period ended March 31,2020, was a wild ride for markets. While the U.S. economy was generally in good shape in 2019, recessionary fears rose throughout the year, prompting the U.S. Federal Reserve (the “Fed”) to announce a rate cut on July 31, the first since 2008, amid growing downside risks to policymakers’ baseline growth and inflation forecasts. Key among those risks were slowing global growth, the threat of additional U.S.-China tariffs, and the possible ramifications surrounding Brexit. The Fed subsequently cut rates twice more in 2019, which caused markets to rally toward the end of the year and into early 2020. Stocks reached new highs and credit spreads tightened to historic levels. Since then, the global outbreak of the coronavirus, COVID-19, has been at the center of everything. As of this writing, COVID-19 has spread to 210 countries, resulted in over 2.5 million cases, and caused over 170,000 deaths. Thus far, the U.S. makes up more than 30% of global cases, and 25% of global deaths. States have required the labor force to work from home if possible, individuals to practice social distancing, and non-essential businesses to shut down.
Closures, quarantines, and social distancing efforts have impacted the travel, hospitality, restaurants, and retail industries, with activity down 100% in some areas of the country. Further exacerbating the decline in output will be reduced business investment, which was already stalling due to falling profits, trade conflicts, and political uncertainty. The coronavirus shock and collapse in oil prices will likely further depress capital expenditures.
In response to the crisis, the Federal Open Market Committee cut rates by a further 125 basis points in the first quarter of 2020 and passed a series of stimulus programs. Among these were the Primary and Secondary Market Corporate Credit Facilities, which are lending programs primarily targeting investment-grade corporate bond issuers, implemented in concert with the U.S. Treasury. It was only after the announcement of this program that corporate credit found some relief from the selloff, but we expect this relief may be temporary.
With an alphabet soup of monetary programs targeting relief from the coronavirus impact, fiscal policy has also stepped up to the plate with a spending bill worth over $2 trillion that aims to assist consumers, states, small businesses, and certain industries. There is no question that these programs will help ease the economic fallout from virus containment measures, but even $2 trillion may be too small given the magnitude of the economic shock that we are facing. Additionally, it is far from clear that fiscal measures are an adequate solution to the issue at hand: the physical impediment to consumer spending. Fiscal and monetary policy can do their part, but ultimately it is public health policy that will likely be the greatest determinant of the economic outlook.
For the 12 months ended March 31, 2020, the Standard & Poor’s 500® (“S&P 500”) Index* returned -6.98%. The decline, while significant, represents something of a recovery in stocks. The S&P 500 peaked at 3,386.15 on February 19, 2020, before plummeting 33.9% to a low of 2,237.40 on March 23, 2020, then recovering some lost ground by the end of the month.
The consensus estimate for S&P 500 earnings per share in 2020 is still around $150. Our research shows S&P 500 earnings per share could fall below $100. Similarly, economists have no way to calibrate how bad the economic data could be based on history. The March U.S. non-farm payrolls
4 | THE RYDEX FUNDS ANNUAL REPORT | |
ECONOMIC AND MARKET OVERVIEW(Unaudited)(concluded) | March 31, 2020 |
report was evidence of this, as it showed a decline in payrolls of 700,000 jobs versus survey expectations of a decline of only 100,000 jobs. We currently expect that second quarter U.S. real gross domestic product (“GDP”) quarter-over-quarter growth could fall by 40% annualized and the unemployment rate could rise to at least 20%. Beyond that, the severity of the crisis depends on containment of the virus and the effectiveness of social distancing measures put in place, but expectations for a quick and sustained V-shaped recovery appear overly optimistic.
For the 12 months ended March 31, 2020, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.92%. The return of the MSCI Emerging Markets Index* was -17.36%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted an 8.93% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -6.94%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.25% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
NASDAQ-100® Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
| | THE RYDEX FUNDS ANNUAL REPORT | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES(Unaudited) |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning September 30, 2019 and ending March 31, 2020.
The following tables illustrate the Fund’s costs in two ways:
Table 1. Based on actual Fund return:This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return:This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
6 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES(Unaudited)(continued) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Fund’s expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the Fund’s prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES(Unaudited)(concluded) |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30,
2019 | Ending
Account Value
March 31,
2020 | Expenses
Paid During
Period2 |
Table 1. Based on actual Fund return3 |
NASDAQ-100® Fund |
Investor Class | 1.38% | 0.53% | $ 1,000.00 | $ 1,005.30 | $ 6.92 |
A-Class | 1.63% | 0.41% | 1,000.00 | 1,004.10 | 8.17 |
C-Class | 2.38% | 0.00% | 1,000.00 | 1,000.00 | 11.90 |
H-Class | 1.63% | 0.38% | 1,000.00 | 1,003.80 | 8.17 |
|
Table 2. Based on hypothetical 5% return (before expenses) |
NASDAQ-100® Fund |
Investor Class | 1.38% | 5.00% | $ 1,000.00 | $ 1,018.10 | $ 6.96 |
A-Class | 1.63% | 5.00% | 1,000.00 | 1,016.85 | 8.22 |
C-Class | 2.38% | 5.00% | 1,000.00 | 1,013.10 | 11.98 |
H-Class | 1.63% | 5.00% | 1,000.00 | 1,016.85 | 8.22 |
1 | Annualized and excludes expenses of the underlying funds in which the Fund invests, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
3 | Actual cumulative return at net asset value for the period September 30, 2019 to March 31, 2020. |
8 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | March 31, 2020 |
NASDAQ-100® FUND
OBJECTIVE: Seeks to provide investment results that correspond, before fees and expenses, to a benchmark for over-the-counter securities on a daily basis. The Fund’s current benchmark is the NASDAQ-100® Index (the “underlying index”).
For the one-year period ended March 31, 2020, NASDAQ-100 Fund maintained a daily correlation of over 99% to its benchmark of 100% of the daily price movement of the NASDAQ-100® Index. The Fund Investor Class returned 5.40%, while the NASDAQ-100 Index returned 7.03% over the same time period.
The sectors contributing the most to the return of the underlying index were Information Technology, Consumer Discretionary, and Health Care. The sectors detracting the most were Industrials, Utilities, and Consumer Staples.
The holdings contributing the most to the return of the underlying index were Microsoft Corp., Apple, Inc., and Amazon.com, Inc. The holdings detracting the most were Cisco Systems, Inc., Comcast Corp. Class A, and Baidu, Inc. ADR.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. Derivatives performed as expected.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II and Guggenheim Strategy Fund III (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II and Guggenheim Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended March 31, 2020, investment in the Short Term Investment Vehicles had a negligible impact on Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
| | THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(continued) | March 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Dates: |
Investor Class | February 14, 1994 |
A-Class | March 31, 2004 |
C-Class | March 26, 2001 |
H-Class | September 18, 2014 |
Ten Largest Holdings (% of Total Net Assets) |
Microsoft Corp. | 10.7% |
Apple, Inc. | 10.1% |
Amazon.com, Inc. | 8.6% |
Facebook, Inc. — Class A | 3.6% |
Alphabet, Inc. — Class C | 3.6% |
Alphabet, Inc. — Class A | 3.6% |
Intel Corp. | 2.7% |
PepsiCo, Inc. | 1.9% |
Cisco Systems, Inc. | 1.9% |
Netflix, Inc. | 1.9% |
Top Ten Total | 48.6% |
| | |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
10 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(continued) | March 31, 2020 |
Cumulative Fund Performance*
| | THE RYDEX FUNDS ANNUAL REPORT | 11 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | March 31, 2020 |
Average Annual Returns* Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
Investor Class Shares | 5.40% | 12.28% | 14.69% |
A-Class Shares | 5.14% | 11.98% | 14.37% |
A-Class Shares with sales charge‡ | 0.14% | 10.89% | 13.82% |
C-Class Shares | 4.31% | 11.16% | 13.54% |
C-Class Shares with CDSC§ | 3.31% | 11.16% | 13.54% |
NASDAQ-100 Index | 7.03% | 13.81% | 16.17% |
| 1 Year | 5 Year | Since
Inception
(09/18/14) |
H-Class Shares | 5.11% | 12.00% | 11.84% |
NASDAQ-100 Index | 7.03% | 13.81% | 13.65% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on the Investor Class shares and A-Class shares only; performance for C-Class shares and H-Class shares will vary due to differences in fee structures. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
12 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
NASDAQ-100® FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 89.7% |
| | | | | | | | | |
Technology - 39.5% |
Microsoft Corp. | | | 702,912 | | | $ | 110,856,252 | |
Apple, Inc. | | | 409,399 | | | | 104,106,072 | |
Intel Corp. | | | 511,272 | | | | 27,670,041 | |
NVIDIA Corp. | | | 71,931 | | | | 18,961,012 | |
Adobe, Inc.* | | | 56,896 | | | | 18,106,583 | |
Broadcom, Inc. | | | 46,623 | | | | 11,054,313 | |
Texas Instruments, Inc. | | | 109,868 | | | | 10,979,109 | |
QUALCOMM, Inc. | | | 134,206 | | | | 9,079,036 | |
Fiserv, Inc.* | | | 79,911 | | | | 7,590,746 | |
Intuit, Inc. | | | 30,595 | | | | 7,036,850 | |
Advanced Micro Devices, Inc.* | | | 130,889 | | | | 5,952,832 | |
Micron Technology, Inc.* | | | 130,116 | | | | 5,472,679 | |
Activision Blizzard, Inc. | | | 90,296 | | | | 5,370,806 | |
Applied Materials, Inc. | | | 108,572 | | | | 4,974,769 | |
Lam Research Corp. | | | 17,052 | | | | 4,092,480 | |
Autodesk, Inc.* | | | 25,809 | | | | 4,028,785 | |
Analog Devices, Inc. | | | 43,288 | | | | 3,880,769 | |
Electronic Arts, Inc.* | | | 34,318 | | | | 3,437,634 | |
Cognizant Technology Solutions Corp. — Class A | | | 64,358 | | | | 2,990,716 | |
NetEase, Inc. ADR | | | 8,575 | | | | 2,752,232 | |
NXP Semiconductor N.V. | | | 32,854 | | | | 2,724,582 | |
KLA Corp. | | | 18,546 | | | | 2,665,802 | |
Paychex, Inc. | | | 42,071 | | | | 2,647,107 | |
Workday, Inc. — Class A* | | | 19,276 | | | | 2,510,121 | |
Cerner Corp. | | | 36,918 | | | | 2,325,465 | |
Xilinx, Inc. | | | 29,556 | | | | 2,303,595 | |
ANSYS, Inc.* | | | 9,895 | | | | 2,300,291 | |
ASML Holding N.V. — Class G | | | 8,705 | | | | 2,277,576 | |
Synopsys, Inc.* | | | 17,664 | | | | 2,274,947 | |
Splunk, Inc.* | | | 17,789 | | | | 2,245,505 | |
Cadence Design Systems, Inc.* | | | 32,979 | | | | 2,177,933 | |
Citrix Systems, Inc. | | | 15,305 | | | | 2,166,423 | |
Microchip Technology, Inc. | | | 28,088 | | | | 1,904,366 | |
Check Point Software Technologies Ltd.* | | | 17,893 | | | | 1,798,962 | |
Skyworks Solutions, Inc. | | | 20,025 | | | | 1,789,834 | |
Take-Two Interactive Software, Inc.* | | | 13,322 | | | | 1,580,122 | |
Maxim Integrated Products, Inc. | | | 31,806 | | | | 1,546,090 | |
Western Digital Corp. | | | 34,955 | | | | 1,454,827 | |
NetApp, Inc. | | | 26,824 | | | | 1,118,293 | |
Total Technology | | | 408,205,557 | |
| | | | | | | | | |
Communications - 29.8% |
Amazon.com, Inc.* | | | 45,683 | | | | 89,069,059 | |
Facebook, Inc. — Class A* | | | 221,730 | | | | 36,984,564 | |
Alphabet, Inc. — Class C* | | | 31,655 | | | | 36,808,751 | |
Alphabet, Inc. — Class A* | | | 31,676 | | | | 36,805,928 | |
Cisco Systems, Inc. | | | 498,609 | | | | 19,600,320 | |
Netflix, Inc.* | | | 51,509 | | | | 19,341,630 | |
Comcast Corp. — Class A | | | 533,580 | | | | 18,344,480 | |
Charter Communications, Inc. — Class A* | | | 25,244 | | | | 11,014,210 | |
T-Mobile US, Inc.* | | | 100,559 | | | | 8,436,900 | |
Booking Holdings, Inc.* | | | 4,919 | | | | 6,617,629 | |
JD.com, Inc. ADR* | | | 108,945 | | | | 4,412,272 | |
Baidu, Inc. ADR* | | | 32,498 | | | | 3,275,473 | |
eBay, Inc. | | | 95,617 | | | | 2,874,247 | |
MercadoLibre, Inc.* | | | 5,843 | | | | 2,854,773 | |
Sirius XM Holdings, Inc.1 | | | 519,936 | | | | 2,568,484 | |
VeriSign, Inc.* | | | 13,800 | | | | 2,485,242 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS(continued) | March 31, 2020 |
NASDAQ-100® FUND | |
| | Shares | | | Value | |
CDW Corp. | | | 16,887 | | | $ | 1,575,050 | |
Trip.com Group Ltd. ADR* | | | 61,467 | | | | 1,441,401 | |
Fox Corp. — Class A | | | 41,667 | | | | 984,591 | |
Expedia Group, Inc. | | | 16,380 | | | | 921,703 | |
Liberty Global plc — Class C* | | | 51,572 | | | | 810,196 | |
Fox Corp. — Class B | | | 31,285 | | | | 715,801 | |
Liberty Global plc — Class A* | | | 21,335 | | | | 352,241 | |
Total Communications | | | 308,294,945 | |
| | | | | | | | | |
Consumer, Non-cyclical - 12.8% |
PepsiCo, Inc. | | | 163,893 | | | | 19,683,549 | |
Amgen, Inc. | | | 69,837 | | | | 14,158,055 | |
PayPal Holdings, Inc.* | | | 138,007 | | | | 13,212,790 | |
Gilead Sciences, Inc. | | | 148,697 | | | | 11,116,588 | |
Mondelez International, Inc. — Class A | | | 169,228 | | | | 8,474,938 | |
Vertex Pharmaceuticals, Inc.* | | | 30,224 | | | | 7,191,801 | |
Automatic Data Processing, Inc. | | | 50,857 | | | | 6,951,135 | |
Intuitive Surgical, Inc.* | | | 13,584 | | | | 6,726,932 | |
Biogen, Inc.* | | | 21,208 | | | | 6,709,787 | |
Regeneron Pharmaceuticals, Inc.* | | | 12,687 | | | | 6,194,935 | |
Illumina, Inc.* | | | 17,278 | | | | 4,718,967 | |
Monster Beverage Corp.* | | | 63,196 | | | | 3,555,407 | |
Kraft Heinz Co. | | | 143,528 | | | | 3,550,883 | |
Verisk Analytics, Inc. — Class A | | | 19,260 | | | | 2,684,459 | |
CoStar Group, Inc.* | | | 4,306 | | | | 2,528,526 | |
IDEXX Laboratories, Inc.* | | | 10,082 | | | | 2,442,264 | |
Alexion Pharmaceuticals, Inc.* | | | 26,009 | | | | 2,335,348 | |
Seattle Genetics, Inc.* | | | 20,144 | | | | 2,324,215 | |
Cintas Corp. | | | 12,165 | | | | 2,107,222 | |
Incyte Corp.* | | | 25,316 | | | | 1,853,891 | |
BioMarin Pharmaceutical, Inc.* | | | 21,112 | | | | 1,783,964 | |
Align Technology, Inc.* | | | 9,264 | | | | 1,611,473 | |
Total Consumer, Non-cyclical | | | 131,917,129 | |
| | | | | | | | | |
Consumer, Cyclical - 6.1% |
Costco Wholesale Corp. | | | 51,925 | | | | 14,805,375 | |
Tesla, Inc.* | | | 21,186 | | | | 11,101,464 | |
Starbucks Corp. | | | 138,807 | | | | 9,125,172 | |
Walgreens Boots Alliance, Inc. | | | 104,904 | | | | 4,799,358 | |
Ross Stores, Inc. | | | 42,515 | | | | 3,697,529 | |
Marriott International, Inc. — Class A | | | 38,426 | | | | 2,874,649 | |
Lululemon Athletica, Inc.* | | | 14,474 | | | | 2,743,547 | |
O’Reilly Automotive, Inc.* | | | 8,892 | | | | 2,676,937 | |
PACCAR, Inc. | | | 40,652 | | | | 2,485,057 | |
Fastenal Co. | | | 67,409 | | | | 2,106,531 | |
Dollar Tree, Inc.* | | | 27,816 | | | | 2,043,641 | |
Copart, Inc.* | | | 27,322 | | | | 1,872,104 | |
Ulta Beauty, Inc.* | | | 6,918 | | | | 1,215,493 | |
United Airlines Holdings, Inc.*,1 | | | 29,741 | | | | 938,329 | |
American Airlines Group, Inc.1 | | | 51,487 | | | | 627,626 | |
Total Consumer, Cyclical | | | 63,112,812 | |
| | | | | | | | | |
Utilities - 0.8% |
Exelon Corp. | | | 114,255 | | | | 4,205,727 | |
Xcel Energy, Inc. | | | 63,025 | | | | 3,800,407 | |
Total Utilities | | | 8,006,134 | |
| | | | | | | | | |
Industrial - 0.5% |
CSX Corp. | | | 91,951 | | | | 5,268,792 | |
| | | | | | | | | |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(continued) | March 31, 2020 |
NASDAQ-100® FUND | |
| | Shares | | | Value | |
Financial - 0.2% |
Willis Towers Watson plc | | | 15,112 | | | $ | 2,566,773 | |
| | | | | | | | | |
Total Common Stocks |
(Cost $406,950,400) | | | | | | | 927,372,142 | |
| | | | | | | | | |
MUTUAL FUNDS† - 3.7% |
Guggenheim Ultra Short Duration Fund — Institutional Class2 | | | 1,610,622 | | | | 15,735,775 | |
Guggenheim Strategy Fund II2 | | | 575,584 | | | | 13,842,806 | |
Guggenheim Strategy Fund III2 | | | 356,029 | | | | 8,569,619 | |
Total Mutual Funds |
(Cost $39,328,710) | | | | | | | 38,148,200 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
FEDERAL AGENCY NOTES†† - 4.7% |
Freddie Mac |
0.01% (Rate Floor: 0.00%) due 04/13/203 | | $ | 20,000,000 | | | | 19,999,530 | |
Federal Farm Credit Bank |
1.96% due 12/30/20 | | | 5,000,000 | | | | 5,000,000 | |
0.40% (U.S. Prime Rate - 2.85%, Rate Floor: 0.00%) due 08/30/223 | | | 3,000,000 | | | | 3,010,256 | |
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 11/23/213 | | | 1,400,000 | | | | 1,402,344 | |
1.75% (3 Month USD LIBOR - 0.08%, Rate Floor: 0.00%) due 01/15/213 | | | 1,000,000 | | | | 1,000,053 | |
Fannie Mae |
0.09% (U.S. Secured Overnight Financing Rate + 0.08%, Rate Floor: 0.00%) due 09/16/203 | | | 5,000,000 | | | | 4,999,534 | |
1.88% due 12/28/20 | | | 2,500,000 | | | | 2,527,021 | |
0.23% (U.S. Secured Overnight Financing Rate + 0.22%, Rate Floor: 0.00%) due 03/16/223 | | | 2,000,000 | | | | 1,996,038 | |
Farmer Mac |
0.23% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 09/01/203 | | | 9,500,000 | | | | 9,500,000 | |
Total Federal Agency Notes |
(Cost $49,426,340) | | | | | | | 49,434,776 | |
| | | | | | | | | |
FEDERAL AGENCY DISCOUNT NOTES†† - 0.5% |
Federal Home Loan Bank |
0.05% due 04/08/204 | | | 5,000,000 | | | | 4,999,951 | |
Total Federal Agency Discount Notes |
(Cost $4,999,951) | | | | | | | 4,999,951 | |
| | | | | | | | | |
U.S. TREASURY BILLS†† - 0.3% |
U.S. Treasury Bills |
0.50% due 04/30/204,5 | | | 3,095,000 | | | | 3,094,862 | |
Total U.S. Treasury Bills |
(Cost $3,093,735) | | | | | | | 3,094,862 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS(continued) | March 31, 2020 |
NASDAQ-100® FUND | |
| | Face
Amount | | | Value | |
REPURCHASE AGREEMENTS††,6 - 0.8% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/207 | | $ | 6,046,507 | | | $ | 6,046,507 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/207 | | | 2,325,579 | | | | 2,325,579 | |
Total Repurchase Agreements |
(Cost $8,372,086) | | | | | | | 8,372,086 | |
| | Shares | | | | |
SECURITIES LENDING COLLATERAL†,8 - 0.3% |
Money Market Fund |
First American Government Obligations Fund — Class Z, 0.39%9 | | | 2,627,975 | | | | 2,627,975 | |
Total Securities Lending Collateral |
(Cost $2,627,975) | | | | | | | 2,627,975 | |
| | | | | | | | | |
Total Investments - 100.0% |
(Cost $514,799,197) | | | 1,034,049,992 | |
Other Assets & Liabilities, net - 0.0% | | | (396,295 | ) |
Total Net Assets - 100.0% | | $ | 1,033,653,697 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
NASDAQ-100 Index Mini Futures Contracts | | | 324 | | | | Jun 2020 | | | $ | 50,527,800 | | | $ | 3,920,366 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Depreciation | |
OTC Equity Index Swap Agreements†† |
BNP Paribas | NASDAQ-100 Index | 1.64% (1 Month USD LIBOR + 0.65%) | At Maturity | | | 04/29/20 | | | | 220 | | | $ | 1,720,976 | | | $ | (18,417 | ) |
Barclays Bank plc | NASDAQ-100 Index | 1.09% (1 Week USD LIBOR + 0.50%) | At Maturity | | | 04/30/20 | | | | 2,563 | | | | 20,029,168 | | | | (193,553 | ) |
Goldman Sachs International | NASDAQ-100 Index | 1.14% (1 Week USD LIBOR + 0.55%) | At Maturity | | | 04/28/20 | | | | 4,232 | | | | 33,070,602 | | | | (353,962 | ) |
| | | | | | | | | | | | | | $ | 54,820,746 | | | $ | (565,932 | ) |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(continued) | March 31, 2020 |
NASDAQ-100® FUND | |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at March 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | Variable rate security. Rate indicated is the rate effective at March 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
6 | Repurchase Agreements — See Note 6. |
7 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
8 | Securities lending collateral — See Note 7. |
9 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | ADR — American Depositary Receipt |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 927,372,142 | | | $ | — | | | $ | — | | | $ | 927,372,142 | |
Mutual Funds | | | 38,148,200 | | | | — | | | | — | | | | 38,148,200 | |
Federal Agency Notes | | | — | | | | 49,434,776 | | | | — | | | | 49,434,776 | |
Federal Agency Discount Notes | | | — | | | | 4,999,951 | | | | — | | | | 4,999,951 | |
U.S. Treasury Bills | | | — | | | | 3,094,862 | | | | — | | | | 3,094,862 | |
Repurchase Agreements | | | — | | | | 8,372,086 | | | | — | | | | 8,372,086 | |
Securities Lending Collateral | | | 2,627,975 | | | | — | | | | — | | | | 2,627,975 | |
Equity Futures Contracts** | | | 3,920,366 | | | | — | | | | — | | | | 3,920,366 | |
Total Assets | | $ | 972,068,683 | | | $ | 65,901,675 | | | $ | — | | | $ | 1,037,970,358 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 565,932 | | | $ | — | | | $ | 565,932 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS(concluded) | March 31, 2020 |
NASDAQ-100® FUND | |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II and Guggenheim Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended March 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | | Value
03/31/19 | | | Additions | | | Reductions | | | Realized
Gain (Loss) | | | Change in
Unrealized
Appreciation
(Depreciation) | |
Mutual Funds | | | | | | | | | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 14,280,251 | | | $ | — | | | $ | — | | | $ | — | | | $ | (437,445 | ) |
Guggenheim Strategy Fund III | | | 8,825,959 | | | | — | | | | — | | | | — | | | | (256,340 | ) |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 11,953,180 | | | | 4,100,000 | | | | — | | | | — | | | | (317,405 | ) |
| | | $ | 35,059,390 | | | $ | 4,100,000 | | | $ | — | | | $ | — | | | $ | (1,011,190 | ) |
Security Name | | Value
03/31/20 | | | Shares
03/31/20 | | | Investment
Income | |
Mutual Funds | | | | | | | | | | | | |
Guggenheim Strategy Fund II | | $ | 13,842,806 | | | | 575,584 | | | $ | 392,540 | |
Guggenheim Strategy Fund III | | | 8,569,619 | | | | 356,029 | | | | 241,783 | |
Guggenheim Ultra Short Duration Fund — Institutional Class | | | 15,735,775 | | | | 1,610,622 | | | | 327,163 | |
| | | $ | 38,148,200 | | | | | | | $ | 961,486 | |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
NASDAQ-100® FUND |
March 31, 2020
Assets: |
Investments in unaffiliated issuers, at value - including $2,610,381 of securities loaned (cost $467,098,401) | | $ | 987,529,706 | |
Investments in affiliated issuers, at value (cost $39,328,710) | | | 38,148,200 | |
Repurchase agreements, at value (cost $8,372,086) | | | 8,372,086 | |
Cash | | | 2,350,689 | |
Segregated cash with broker | | | 2,261,601 | |
Receivables: |
Securities sold | | | 6,947,272 | |
Fund shares sold | | | 2,404,038 | |
Dividends | | | 380,694 | |
Interest | | | 106,191 | |
Securities lending income | | | 882 | |
Total assets | | | 1,048,501,359 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 565,932 | |
Payable for: |
Fund shares redeemed | | | 8,532,673 | |
Return of securities lending collateral | | | 2,627,975 | |
Management fees | | | 641,912 | |
Variation margin on futures contracts | | | 370,980 | |
Transfer agent and administrative fees | | | 274,107 | |
Distribution and service fees | | | 81,610 | |
Portfolio accounting fees | | | 53,471 | |
Swap settlement | | | 42,436 | |
Trustees’ fees* | | | 23,473 | |
Miscellaneous | | | 1,633,093 | |
Total liabilities | | | 14,847,662 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 1,033,653,697 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 495,894,523 | |
Total distributable earnings (loss) | | | 537,759,174 | |
Net assets | | $ | 1,033,653,697 | |
| | | | | |
Investor Class: |
Net assets | | $ | 888,189,143 | |
Capital shares outstanding | | | 22,385,823 | |
Net asset value per share | | $ | 39.68 | |
| | | | | |
A-Class: |
Net assets | | $ | 41,054,358 | |
Capital shares outstanding | | | 1,131,419 | |
Net asset value per share | | $ | 36.29 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 38.10 | |
| | | | | |
C-Class: |
Net assets | | $ | 80,633,082 | |
Capital shares outstanding | | | 2,585,704 | |
Net asset value per share | | $ | 31.18 | |
| | | | | |
H-Class: |
Net assets | | $ | 23,777,114 | |
Capital shares outstanding | | | 655,372 | |
Net asset value per share | | $ | 36.28 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
STATEMENT OF OPERATIONS |
NASDAQ-100® FUND |
Year Ended March 31, 2020
Investment Income: |
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $12,278) | | $ | 11,825,938 | |
Dividends from securities of affiliated issuers | | | 961,486 | |
Interest | | | 1,420,342 | |
Income from securities lending, net | | | 7,681 | |
Total investment income | | | 14,215,447 | |
| | | | | |
Expenses: |
Management fees | | | 9,059,142 | |
Distribution and service fees: |
A-Class | | | 133,876 | |
C-Class | | | 893,228 | |
H-Class | | | 89,968 | |
Transfer agent and administrative fees | | | 3,078,765 | |
Registration fees | | | 992,583 | |
Portfolio accounting fees | | | 700,119 | |
Professional fees | | | 586,790 | |
Trustees’ fees* | | | 265,593 | |
Custodian fees | | | 170,700 | |
Line of credit fees | | | 903 | |
Prime broker interest expense | | | 162 | |
Miscellaneous | | | 1,731,274 | |
Total expenses | | | 17,703,103 | |
Less: |
Expenses waived by Adviser | | | (34,372 | ) |
Net expenses | | | 17,668,731 | |
Net investment loss | | | (3,453,284 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | $ | 95,863,271 | |
Swap agreements | | | 10,425,445 | |
Futures contracts | | | 2,397,651 | |
Net realized gain | | | 108,686,367 | |
Net change in unrealized appreciation (depreciation) on: |
Investments in unaffiliated issuers | | | (35,712,847 | ) |
Investments in affiliated issuers | | | (1,011,190 | ) |
Swap agreements | | | (628,331 | ) |
Futures contracts | | | 263,638 | |
Net change in unrealized appreciation (depreciation) | | | (37,088,730 | ) |
Net realized and unrealized gain | | | 71,597,637 | |
Net increase in net assets resulting from operations | | $ | 68,144,353 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENTS OF CHANGES IN NET ASSETS |
NASDAQ-100® FUND | |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment loss | | $ | (3,453,284 | ) | | $ | (2,672,127 | ) |
Net realized gain on investments | | | 108,686,367 | | | | 29,980,370 | |
Net change in unrealized appreciation (depreciation) on investments | | | (37,088,730 | ) | | | 88,603,777 | |
Net increase in net assets resulting from operations | | | 68,144,353 | | | | 115,912,020 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Investor Class | | | (20,287,863 | ) | | | (15,419,551 | ) |
A-Class | | | (1,043,499 | ) | | | (985,618 | ) |
C-Class | | | (2,257,087 | ) | | | (1,757,606 | ) |
H-Class | | | (648,117 | ) | | | (662,148 | ) |
Total distributions to shareholders | | | (24,236,566 | ) | | | (18,824,923 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
Investor Class | | | 1,328,414,692 | | | | 1,133,065,829 | |
A-Class | | | 30,863,059 | | | | 45,605,047 | |
C-Class | | | 18,499,187 | | | | 30,479,325 | |
H-Class | | | 140,487,069 | | | | 136,853,790 | |
Distributions reinvested | | | | | | | | |
Investor Class | | | 19,606,905 | | | | 14,906,982 | |
A-Class | | | 977,143 | | | | 845,201 | |
C-Class | | | 2,159,664 | | | | 1,687,671 | |
H-Class | | | 645,234 | | | | 660,051 | |
Cost of shares redeemed | | | | | | | | |
Investor Class | | | (1,477,875,968 | ) | | | (1,176,363,858 | ) |
A-Class | | | (52,878,356 | ) | | | (43,829,464 | ) |
C-Class | | | (26,781,762 | ) | | | (38,634,376 | ) |
H-Class | | | (164,617,240 | ) | | | (160,150,861 | ) |
Net decrease from capital share transactions | | | (180,500,373 | ) | | | (54,874,663 | ) |
Net increase (decrease) in net assets | | | (136,592,586 | ) | | | 42,212,434 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 1,170,246,283 | | | | 1,128,033,849 | |
End of year | | $ | 1,033,653,697 | | | $ | 1,170,246,283 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
STATEMENTS OF CHANGES IN NET ASSETS(concluded) |
NASDAQ-100® FUND | |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
Investor Class | | | 32,616,628 | | | | 30,604,193 | |
A-Class | | | 865,992 | | | | 1,323,544 | |
C-Class | | | 567,526 | | | | 1,009,503 | |
H-Class | | | 3,768,582 | | | | 4,004,601 | |
Shares issued from reinvestment of distributions | | | | | | | | |
Investor Class | | | 458,320 | | | | 423,253 | |
A-Class | | | 24,959 | | | | 26,111 | |
C-Class | | | 64,046 | | | | 59,869 | |
H-Class | | | 16,485 | | | | 20,391 | |
Shares redeemed | | | | | | | | |
Investor Class | | | (36,205,571 | ) | | | (32,014,747 | ) |
A-Class | | | (1,433,295 | ) | | | (1,297,551 | ) |
C-Class | | | (829,227 | ) | | | (1,296,281 | ) |
H-Class | | | (4,442,249 | ) | | | (4,713,948 | ) |
Net decrease in shares | | | (4,527,804 | ) | | | (1,851,062 | ) |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS |
NASDAQ-100® FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Investor Class | | Year
Ended
March 31,
2020 | | | Year
Ended
March 31,
2019 | | | Year
Ended
March 29,
2018 | | | Year
Ended
March 31,
2017 | | | Year
Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 38.39 | | | $ | 34.94 | | | $ | 30.68 | | | $ | 25.75 | | | $ | 25.38 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.08 | ) | | | (.05 | ) | | | (.05 | ) | | | (.06 | ) | | | (.05 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 2.21 | | | | 4.11 | | | | 6.35 | | | | 5.47 | | | | .96 | |
Total from investment operations | | | 2.13 | | | | 4.06 | | | | 6.30 | | | | 5.41 | | | | .91 | |
Less distributions from: |
Net realized gains | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Total distributions | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Net asset value, end of period | | $ | 39.68 | | | $ | 38.39 | | | $ | 34.94 | | | $ | 30.68 | | | $ | 25.75 | |
|
Total Return | | | 5.40 | % | | | 11.79 | % | | | 20.76 | % | | | 21.21 | % | | | 3.49 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 888,189 | | | $ | 979,675 | | | $ | 926,146 | | | $ | 760,485 | | | $ | 667,018 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.19 | %) | | | (0.14 | %) | | | (0.14 | %) | | | (0.21 | %) | | | (0.19 | %) |
Total expensesb | | | 1.37 | % | | | 1.36 | % | | | 1.28 | % | | | 1.29 | % | | | 1.25 | % |
Net expensesc | | | 1.37 | % | | | 1.36 | % | | | 1.28 | % | | | 1.29 | % | | | 1.25 | % |
Portfolio turnover rate | | | 54 | % | | | 32 | % | | | 48 | % | | | 72 | % | | | 228 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
FINANCIAL HIGHLIGHTS(continued) |
NASDAQ-100® FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year
Ended
March 31,
2020 | | | Year
Ended
March 31,
2019 | | | Year
Ended
March 29,
2018 | | | Year
Ended
March 31,
2017 | | | Year
Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 35.26 | | | $ | 32.22 | | | $ | 28.49 | | | $ | 24.04 | | | $ | 23.78 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.17 | ) | | | (.13 | ) | | | (.12 | ) | | | (.13 | ) | | | (.10 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 2.04 | | | | 3.78 | | | | 5.89 | | | | 5.06 | | | | .90 | |
Total from investment operations | | | 1.87 | | | | 3.65 | | | | 5.77 | | | | 4.93 | | | | .80 | |
Less distributions from: |
Net realized gains | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Total distributions | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Net asset value, end of period | | $ | 36.29 | | | $ | 35.26 | | | $ | 32.22 | | | $ | 28.49 | | | $ | 24.04 | |
|
Total Returnd | | | 5.14 | % | | | 11.51 | % | | | 20.44 | % | | | 20.76 | % | | | 3.26 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 41,054 | | | $ | 59,021 | | | $ | 52,257 | | | $ | 63,311 | | | $ | 60,499 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.44 | %) | | | (0.38 | %) | | | (0.39 | %) | | | (0.51 | %) | | | (0.42 | %) |
Total expensesb | | | 1.62 | % | | | 1.61 | % | | | 1.53 | % | | | 1.53 | % | | | 1.51 | % |
Net expensesc | | | 1.62 | % | | | 1.61 | % | | | 1.53 | % | | | 1.53 | % | | | 1.51 | % |
Portfolio turnover rate | | | 54 | % | | | 32 | % | | | 48 | % | | | 72 | % | | | 228 | % |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS(continued) |
NASDAQ-100® FUND |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
C-Class | | Year
Ended
March 31,
2020 | | | Year
Ended
March 31,
2019 | | | Year
Ended
March 29,
2018 | | | Year
Ended
March 31,
2017 | | | Year
Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 30.64 | | | $ | 28.29 | | | $ | 25.41 | | | $ | 21.62 | | | $ | 21.60 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.39 | ) | | | (.34 | ) | | | (.32 | ) | | | (.28 | ) | | | (.26 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 1.77 | | | | 3.30 | | | | 5.24 | | | | 4.55 | | | | .82 | |
Total from investment operations | | | 1.38 | | | | 2.96 | | | | 4.92 | | | | 4.27 | | | | .56 | |
Less distributions from: |
Net realized gains | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Total distributions | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Net asset value, end of period | | $ | 31.18 | | | $ | 30.64 | | | $ | 28.29 | | | $ | 25.41 | | | $ | 21.62 | |
|
Total Returnd | | | 4.31 | % | | | 10.70 | % | | | 19.57 | % | | | 19.98 | % | | | 2.48 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 80,633 | | | $ | 85,274 | | | $ | 85,149 | | | $ | 58,647 | | | $ | 38,900 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.19 | %) | | | (1.14 | %) | | | (1.15 | %) | | | (1.21 | %) | | | (1.19 | %) |
Total expensesb | | | 2.37 | % | | | 2.36 | % | | | 2.28 | % | | | 2.28 | % | | | 2.26 | % |
Net expensesc | | | 2.37 | % | | | 2.36 | % | | | 2.28 | % | | | 2.28 | % | | | 2.26 | % |
Portfolio turnover rate | | | 54 | % | | | 32 | % | | | 48 | % | | | 72 | % | | | 228 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
FINANCIAL HIGHLIGHTS(concluded) |
NASDAQ-100® FUND |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year
Ended
March 31,
2020 | | | Year
Ended
March 31,
2019 | | | Year
Ended
March 29,
2018 | | | Year
Ended
March 31,
2017 | | | Year
Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 35.26 | | | $ | 32.22 | | | $ | 28.49 | | | $ | 24.00 | | | $ | 23.76 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.16 | ) | | | (.13 | ) | | | (.12 | ) | | | (.14 | ) | | | (.13 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 2.02 | | | | 3.78 | | | | 5.89 | | | | 5.11 | | | | .91 | |
Total from investment operations | | | 1.86 | | | | 3.65 | | | | 5.77 | | | | 4.97 | | | | .78 | |
Less distributions from: |
Net realized gains | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Total distributions | | | (.84 | ) | | | (.61 | ) | | | (2.04 | ) | | | (.48 | ) | | | (.54 | ) |
Net asset value, end of period | | $ | 36.28 | | | $ | 35.26 | | | $ | 32.22 | | | $ | 28.49 | | | $ | 24.00 | |
|
Total Return | | | 5.11 | % | | | 11.51 | % | | | 20.49 | % | | | 20.92 | % | | | 3.18 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 23,777 | | | $ | 46,276 | | | $ | 64,483 | | | $ | 53,441 | | | $ | 173,638 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.43 | %) | | | (0.37 | %) | | | (0.37 | %) | | | (0.57 | %) | | | (0.51 | %) |
Total expensesb | | | 1.62 | % | | | 1.61 | % | | | 1.53 | % | | | 1.54 | % | | | 1.51 | % |
Net expensesc | | | 1.62 | % | | | 1.61 | % | | | 1.53 | % | | | 1.54 | % | | | 1.51 | % |
Portfolio turnover rate | | | 54 | % | | | 32 | % | | | 48 | % | | | 72 | % | | | 228 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Does not include expenses of the underlying funds in which the Fund invests. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Total return does not reflect the impact of any applicable sales charges. |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund. The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each fund separately.
The Trust offers a combination of seven separate classes of shares: Investor Class shares, A-Class shares, C-Class shares, H-Class shares, P-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. C-Class shares automatically convert to A-Class shares on or about the 10th day of the month following the 10-year anniversary of the purchase of the C-Class shares. This conversion will be executed without any sales charge, fee or other charge. After the conversion is completed, the shares will be subject to all features and expenses of A-Class shares. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares require a minimum initial investment of $2 million and a minimum account balance of $1 million. At March 31, 2020, the Trust consisted of fifty-two funds (the “Funds”).
This report covers the NASDAQ-100® Fund (the “Fund”), a non-diversified investment company.
Only Investor Class, A-Class, C-Class, and H-Class shares have been issued by the Fund.
The Fund is designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offers unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Fund to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Fund operates as an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
| | THE RYDEX FUNDS ANNUAL REPORT | 27 |
NOTES TO FINANCIAL STATEMENTS(continued) |
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The NAV of each Class of the Fund is calculated by dividing the market value of the Fund’s securities and other assets, less all liabilities, attributable to the Class by the number of outstanding shares of the Class.
(a) Valuation of Investments
The Board of Trustees of the Fund (the “Board”) has adopted policies and procedures for the valuation of the Fund’s investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities and/or other assets.
Valuations of the Fund’s securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Fund’s officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date.
U.S. Government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
28 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The values of swap agreements entered into by the Fund are accounted for using the unrealized appreciation or depreciation on the agreements that are determined by marking the agreements to the last quoted value of the index or other underlying position that the swaps pertain to at the close of the NYSE.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis.
In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedule of Investments reflect the effective rates paid at the time of purchase by the Fund. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
| | THE RYDEX FUNDS ANNUAL REPORT | 29 |
NOTES TO FINANCIAL STATEMENTS(continued) |
(c) Futures Contracts
Upon entering into a futures contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(d) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(e) Foreign Taxes
The Fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Fund invests. These foreign taxes, if any, are paid by the Fund and reflected in its Statement of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of March 31, 2020, if any, are disclosed in the Fund’s Statement of Assets and Liabilities.
(f) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included
30 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(g) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares, unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(h) Class Allocations
Interest and dividend income, most expenses, all realized gains and losses, and all unrealized appreciation and depreciation are allocated to the classes based upon the value of the outstanding shares in each Class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust based on the respective net assets of each Fund included in the Trust.
(i) Cash
The Fund may leave cash overnight in its cash account with the custodian. Periodically, the Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.08% at March 31, 2020.
(j) Indemnifications
Under the Fund’s organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
Note 2 – Derivatives
As part of its investment strategy, the Fund utilizes a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized in the Statement of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
| | THE RYDEX FUNDS ANNUAL REPORT | 31 |
NOTES TO FINANCIAL STATEMENTS(continued) |
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Fund utilized derivatives for the following purposes:
Index Exposure:the use of an instrument to obtain exposure to a listed or other type of index.
Liquidity:the ability to buy or sell exposure with little price/market impact.
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statement of Assets and Liabilities; securities held as collateral are noted on the Schedule of Investments.
The following table represents the Fund’s use and volume of futures on a monthly basis:
| | | Average Notional Amount | |
Use | | Long | |
Index exposure, Liquidity | | $ | 77,358,032 | |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing over-the-counter (“OTC”) swaps, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are
32 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Total return swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as an index) for a fixed or variable interest rate. Total return swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. When utilizing total return swaps, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in value.
The following table represents the Fund’s use and volume of total return swaps on a monthly basis:
| | | Average Notional Amount | |
Use | | Long | |
Index exposure,Liquidity | | $ | 27,175,446 | |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Fund’s Statement of Assets and Liabilities as of March 31, 2020:
Derivative Investment Type | Asset Derivative | Liability Derivatives |
Equity contracts | | Variation margin on futures contracts |
| | Unrealized depreciation on OTC swap agreements |
The following table sets forth the fair value of the Fund’s derivative investments categorized by primary risk exposure at March 31, 2020:
Asset Derivative Investments Value |
| | Futures
Equity
Risk* | | | Swaps
Equity
Risk | | | Total Value at
March 31,
2020 | |
| | | $ | 3,920,366 | | | $ | — | | | $ | 3,920,366 | |
| | THE RYDEX FUNDS ANNUAL REPORT | 33 |
NOTES TO FINANCIAL STATEMENTS(continued) |
Liability Derivative Investments Value |
| | Futures
Equity
Risk* | | | Swaps
Equity
Risk | | | Total Value at
March 31,
2020 | |
| | | $ | — | | | $ | 565,932 | | | $ | 565,932 | |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedule of Investments. For exchange-traded and centrally cleared derivatives, variation margin is reported within the Statement of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Fund’s Statement of Operations for the year ended March 31, 2020:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
| Net realized gain (loss) on swap agreements |
| Net change in unrealized appreciation (depreciation) on swap agreements |
The following is a summary of the Fund’s realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statement of Operations categorized by primary risk exposure for the year ended March 31, 2020:
Realized Gain (Loss) on Derivative Investments Recognized on the Statement of Operations |
| | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Total | |
| | | $ | 2,397,651 | | | $ | 10,425,445 | | | $ | 12,823,096 | |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statement of Operations |
| | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Total | |
| | | $ | 263,638 | | | $ | (628,331 | ) | | $ | (364,693 | ) |
In conjunction with the use of derivative instruments, the Fund is required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Fund uses margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Fund as collateral.
34 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Fund enters into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Fund to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, are reported separately on the Statement of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Fund in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Fund, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Fund, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
| | THE RYDEX FUNDS ANNUAL REPORT | 35 |
NOTES TO FINANCIAL STATEMENTS(continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
| | | Gross | | | Gross
Amounts
Offset in the | | | Net Amount
of Liabilities
Presented on | | | Gross Amounts Not Offset
in the Statement of
Assets and Liabilities | | | | | |
Instrument | | Amounts of
Recognized
Liabilities1 | | | Statement of
Assets and
Liabilities | | | the Statement
of Assets and
Liabilities | | | Financial
Instruments | | | Cash
Collateral
Pledged | | | Net
Amount | |
Swap equity contracts | | $ | 565,932 | | | $ | — | | | $ | 565,932 | | | $ | (372,379 | ) | | $ | (193,553 | ) | | $ | — | |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
The Fund has the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of March 31, 2020.
Counterparty | Asset Type | | Cash Pledged | | | Cash Received | |
Barclays Bank plc | Total return swap agreements | | $ | 481,003 | | | $ | — | |
Goldman Sachs Group | Futures contracts | | | 1,780,598 | | | | — | |
| | | $ | 2,261,601 | | | $ | — | |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
36 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Fund pays GI investment advisory fees calculated at an annualized rate of 0.75% of the average daily net assets of the Fund.
When the aggregate assets of each series of the Trust (excluding the Long Short Equity Fund, Managed Futures Strategy Fund and Multi-Hedge Strategies Fund) and each series of Rydex Dynamic Funds equal or exceed $10 billion, the advisory fee rate paid by the Fund will be reduced in accordance with the asset level and breakpoint schedule set forth below.
Fund Assets Under Management | | Fund Asset-Based
Breakpoint Reductions | |
$500 million - $1 billion | | | 0.025 | % |
> $1 billion - $2 billion | | | 0.050 | % |
> $2 billion | | | 0.075 | % |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted a Distribution Plan applicable to A-Class and P-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Fund will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services.
The Board has adopted a separate Distribution and Shareholder Services Plan applicable to C-Class shares that allows the Fund to pay annual distribution and service fees of 1.00% of the Fund’s C-Class shares average daily net assets. The annual 0.25% service fee compensates a shareholder’s financial adviser for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial adviser an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial adviser. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
| | THE RYDEX FUNDS ANNUAL REPORT | 37 |
NOTES TO FINANCIAL STATEMENTS(continued) |
For the year ended March 31, 2020, GFD retained sales charges of $122,345 relating to sales of A-Class shares of the Trust.
If the Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. Fee waivers will be calculated at the investing Fund level without regard to any expense cap, if any, in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended March 31, 2020, the Fund waived $34,372 related to investments in affiliated funds.
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Fund’s administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Fund’s securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Fund’s custodian. As custodian, U.S. Bank is responsible for the custody of the Fund’s assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of the Fund’s average daily net assets and out of pocket expenses.
Note 6 – Repurchase Agreements
The Fund transfers uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At March 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and
Terms of Agreement | | Face
Value | | | Repurchase
Price | | | Collateral | | | Par
Value | | | Fair
Value | |
| J.P. Morgan Securities LLC | | | | | | | | | | | U.S. Treasury Note | | | | | | | | | |
| 0.01% | | | | | | | | | | | 2.00 | % | | | | | | | | |
| Due 04/01/20 | | $ | 129,371,353 | | | $ | 129,371,389 | | | | 11/30/22 | | | $ | 125,405,900 | | | $ | 131,958,818 | |
| | | | | | | | | | | | | | | | | | | | | |
| BofA Securities, Inc. | | | | | | | | | | | U.S. Treasury Note | | | | | | | | | |
| 0.00% | | | | | | | | | | | 2.13 | % | | | | | | | | |
| Due 04/01/20 | | | 49,758,213 | | | | 49,758,213 | | | | 08/15/21 | | | | 49,322,100 | | | | 50,753,381 | |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk
38 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Fund may lend its securities to approved brokers to earn additional income. Security lending income shown on the Statement of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Fund act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Fund receives cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Fund’s securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Fund bears the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund the next business day. Although the collateral mitigates the risk, the Fund could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
At March 31, 2020, the Fund participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
| | | Gross Amounts Not Offset in the
Statement of Assets and Liabilities | | | | Securities Lending Collateral | |
| | Value of
Securities
Loaned | | | Collateral
Received(a) | | | Net Amount | | | | Cash
Collateral
Invested | | | Cash
Collateral
Uninvested | | | Total
Collateral | |
| | | $ | 2,610,381 | | | $ | (2,610,381 | ) | | $ | — | | | | $ | 2,627,975 | | | $ | — | | | $ | 2,627,975 | |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to over collateralization. |
In the event of counterparty default, the Fund has the right to collect the collateral to offset losses incurred. There is potential loss to the Fund in the event the Fund is delayed or prevented from exercising its right to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
| | THE RYDEX FUNDS ANNUAL REPORT | 39 |
NOTES TO FINANCIAL STATEMENTS(continued) |
Note 8 – Federal Income Tax Information
The Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
At March 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost, and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
The Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended March 31, 2020 was as follows:
| | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
| | | $ | 157,143 | | | $ | 24,079,423 | | | $ | 24,236,566 | |
40 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
The tax character of distributions paid during the year ended March 31, 2019 was as follows:
| | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
| | | $ | 18,824,070 | | | $ | 853 | | | $ | 18,824,923 | |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of March 31, 2020 were as follows:
| | Undistributed
Ordinary
Income | | | Undistributed
Long-Term
Capital Gain | | | Net Unrealized
Appreciation
(Depreciation) | | | Accumulated
Capital and
Other Losses | | | Total | |
| | | $ | 14,003,461 | | | $ | 54,549,732 | | | $ | 469,205,981 | | | $ | — | | | $ | 537,759,174 | |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Fund that may be carried forward and applied against future capital gains. Under the RIC Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. As of March 31, 2020, the Fund had no capital loss carryforwards.
For the year ended March 31, 2020, no capital loss carryforward amounts were utilized.
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to losses deferred due to wash sales, distributions in connection with redemption of fund shares, income accruals on certain investments, and the “mark-to-market” of certain derivatives. Additional differences may result from the tax treatment of net operating losses and the tax treatement of bond premium/discount amortization. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statement of Assets and Liabilities as of March 31, 2020 for permanent book/tax differences:
| | Paid In
Capital | | | Total
Distributable
Earnings/(Loss) | |
| | | $ | 45,178,393 | | | $ | (45,178,393 | ) |
| | THE RYDEX FUNDS ANNUAL REPORT | 41 |
NOTES TO FINANCIAL STATEMENTS(continued) |
At March 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
| | Tax
Cost | | | Tax
Unrealized
Appreciation | | | Tax
Unrealized
Depreciation | | | Net Unrealized
Appreciation/
(Depreciation) | |
| | | $ | 564,278,079 | | | $ | 484,073,698 | | | $ | (14,867,717 | ) | | $ | 469,205,981 | |
Note 9 – Securities Transactions
For the year ended March 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
| | Purchases | | | Sales | |
| | | $ | 604,722,236 | | | $ | 797,842,962 | |
The Fund is permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended March 31, 2020, the Fund engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
| | Purchases | | | Sales | | | Realized Loss | |
| | | $ | 280,173,777 | | | $ | 240,138,952 | | | $ | (784,126 | ) |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 3.02% for the year ended March 31, 2020. The Fund did not have any borrowings outstanding under this agreement at March 31, 2020.
42 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
The average daily balance borrowed by the Fund for the year ended March 31, 2020, was as follows:
| | Average Daily Balance | |
| | | $ | 71,041 | |
Note 11 – Legal Proceedings
Tribune Company
Rydex Series Funds has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitledKirschner v. FitzSimons,No. 12-2652 (S.D.N.Y.) (formerlyOfficial Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Series Funds of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Series Funds, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
TheFitzSimonsaction and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captionedIn re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
| | THE RYDEX FUNDS ANNUAL REPORT | 43 |
NOTES TO FINANCIAL STATEMENTS(continued) |
On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments.
On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearingen bancbefore the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearingen bancon January 2, 2020. The Second Circuit denied the petition on February 6, 2020.
On May 23, 2014, the defendants filed motions to dismiss theFitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in theFitzSimonsaction. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The plaintiff requested that the Court direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling inMerit
44 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS(continued) |
Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 12 – Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities (the “2017 ASU”) which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The 2017 ASU does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. As of April 1, 2019, the Fund has fully adopted the provisions of the 2017 ASU which were applied on a modified retrospective basis, as prescribed. The adoption did not result in a cumulative-effect
| | THE RYDEX FUNDS ANNUAL REPORT | 45 |
NOTES TO FINANCIAL STATEMENTS(concluded) |
adjustment as of the beginning of the period and had no impact on total distributable earnings, net assets, the current period results from operations, or any prior period information presented in the financial statements.
Note 13 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Fund’s investments and a shareholder’s investment in the Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Fund, the Fund, its service providers, the markets in which it invests and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 14 – Subsequent Events
The Fund evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Fund’s financial statements.
46 | THE RYDEX FUNDS ANNUAL REPORT | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of NASDAQ-100® Fund and the Board of Trustees of Rydex Series Funds
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of NASDAQ-100® Fund (the “Fund”) (one of the funds constituting Rydex Series Funds (the “Trust”)), including the schedule of investments, as of March 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Rydex Series Funds) at March 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities
| | THE RYDEX FUNDS ANNUAL REPORT | 47 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM(concluded) |
owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
May 28, 2020
48 | THE RYDEX FUNDS ANNUAL REPORT | |
OTHER INFORMATION(Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Fund’s investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2020, the Fund had the corresponding percentages qualify for the reduced tax rate pursuant to the Jobs and Growth Tax Relief and Reconciliation Act of 2003 or for the dividends received deduction for corporations. See the qualified dividend income and dividend received deduction columns, respectively, in the table below.
Additionally, of the taxable ordinary income distributions paid during the fiscal year ended March 31, 2020, the Fund had the corresponding percentage qualify as qualified short-term capital gains as permitted by IRC Section 871(k)(2). See qualified short-term capital gain column in the table below.
| | Qualified
Dividend
Income | | | Dividend
Received
Deduction | | | Qualified
Short-Term
Capital Gain | |
| | | | 100.00 | % | | | 38.40 | % | | | 100.00 | % |
With respect to the taxable year ended March 31, 2020, the Fund hereby designates as capital gain dividends the amount listed below, or, if subsequently determined to be different, the net capital gain of such year:
| | | | From long-term
capital gain: | | | From long-term capital
gain, using proceeds
from shareholder
redemptions: | |
| | | | | $ | 24,079,423 | | | $ | 45,178,393 | |
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Fund’s portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
| | THE RYDEX FUNDS ANNUAL REPORT | 49 |
OTHER INFORMATION(Unaudited)(concluded) |
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. The Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Fund usually classifies sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Fund’s Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Fund’s Forms N-PORT and N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
50 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other Directorships
Held by Trustees*** |
INDEPENDENT TRUSTEES | | | |
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A.
Chubb, Jr. (1946) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 | Current: Retired
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
| | THE RYDEX FUNDS ANNUAL REPORT | 51 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other Directorships
Held by Trustees*** |
INDEPENDENT TRUSTEES - continued | | |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman
Friedrich III (1946) | Trustee and Chair of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F.
Lydon, Jr. (1960) | Trustee and Vice Chair of the Contracts Review Committee | Since 2005 (Trustee) Since 2019 (Vice Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
52 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other Directorships
Held by Trustees*** |
INDEPENDENT TRUSTEES - continued | | |
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018-present); Edward-Elmhurst Healthcare System (2012-present).
Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019 (Chair of the Audit Committee) | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
| | THE RYDEX FUNDS ANNUAL REPORT | 53 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other Directorships
Held by Trustees*** |
INDEPENDENT TRUSTEES - concluded | |
Ronald E.
Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
54 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other Directorships
Held by Trustees*** |
INTERESTED TRUSTEE | |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019
(Vice President
and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | Each Trustee also serves on the boards of trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Managed Duration Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Funds and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the board of trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
| | THE RYDEX FUNDS ANNUAL REPORT | 55 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS | |
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
56 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS - continued | |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
| | THE RYDEX FUNDS ANNUAL REPORT | 57 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(concluded) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS - concluded | |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
58 | THE RYDEX FUNDS ANNUAL REPORT | |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE(Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our
| | THE RYDEX FUNDS ANNUAL REPORT | 59 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE(Unaudited)(continued) |
legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law. In addition to the specific uses described above, we also use your information in the following manner:
| | ● | We use your information in connection with servicing your accounts. |
| | ● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
| | ● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
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60 | THE RYDEX FUNDS ANNUAL REPORT | |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE(Unaudited)(continued) |
To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
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When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
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How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based
| | THE RYDEX FUNDS ANNUAL REPORT | 61 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE(Unaudited)(concluded) |
on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
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We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
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In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
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If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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3.31.2020
Rydex Funds Annual Report
Guggenheim Alternatives Funds |
Guggenheim Long Short Equity Fund | | |
Rydex International Equity Funds |
Rydex Emerging Markets 2x Strategy Fund | | |
Rydex Inverse Emerging Markets 2x Strategy Fund | | |
Rydex Fixed Income Fund |
Rydex Emerging Markets Bond Strategy Fund | | |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports may no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from a fund electronically by calling 800.820.0888, going to GuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a fund directly, you can inform the Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RSTF-ANN-0320x0321 |
| | |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
LONG SHORT EQUITY FUND | 10 |
EMERGING MARKETS 2x STRATEGY FUND | 30 |
INVERSE EMERGING MARKETS 2x STRATEGY FUND | 39 |
EMERGING MARKETS BOND STRATEGY FUND | 47 |
NOTES TO FINANCIAL STATEMENTS | 55 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 71 |
OTHER INFORMATION | 72 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 74 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 79 |
| | THE RYDEX FUNDS ANNUAL REPORT | 1 |
Dear Shareholder:
The fiscal year ended March 31, 2020, concluded on a somber note. Even though markets performed well for most of the period, the emergence of a novel and highly contagious form of coronavirus in the last weeks of the period adversely impacted global commercial activity and contributed to significant volatility in certain markets, unseen since the great recession of 2008.
As it spread beyond Asia to virtually every country in the world, many governments and businesses instituted quarantines and closures, which has resulted in significant disruption in manufacturing, supply chains, consumer demand and economic activity. The U.S. Federal Reserve responded quickly to provide liquidity in order to ensure that the U.S. markets continued to function efficiently. The fiscal policy included a spending bill worth over $2 trillion to assist consumers, states, small businesses and certain industries. While these actions helped stabilize the market, volatile conditions continued into April.
As discussed in this annual shareholder report, these events have affected performance of many of our funds (the “Fund” or “Funds”). We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
Security Investors, LLC (the “Investment Adviser”), the Investment Adviser for the Funds, is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm. An affiliate of Guggenheim and the Investment Adviser, Guggenheim Funds Distributors, LLC, is the distributor of the Funds.
Together, we are committed to the safety and prosperity of our clients, our employees, and our shareholders. The resources of the firm are being made fully available not only to support our clients, but also to support our employees and their families.
Please practice the appropriate prudence for the protection not only of your health and that of your friends and loved ones but also for our neighbors and communities. Thank you for the trust you place in us.
Sincerely,
Security Investors, LLC
April 30, 2020
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
2 | THE RYDEX FUNDS ANNUAL REPORT | |
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
The Long Short Equity Fund may not be suitable for all investors. ● The Fund is subject to the risk that the Advisor’s use of a momentum-driven investment strategy may cause the Fund to underperform other types of mutual funds that use different investment strategies during periods when momentum investing is out of favor. ● It is possible that the stocks the Fund holds long will decline in value at the same time that the stocks or indices being shorted increase in value, thereby increasing potential losses to the Fund. ● The Fund’s loss on a short sale is potentially unlimited because there is no upper limit on the price a borrowed security could attain. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The use of derivatives, such as futures, options and swap agreements, may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund may invest in American Depositary Receipts (“ADRs”) therefore subjecting the value of the Fund’s portfolio to fluctuations in foreign exchange rates. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. See the prospectus for more information on these and additional risks.
Inverse and leveraged Funds are not suitable for all investors. ● These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● Inverse Funds involve certain risks, which include increased volatility due to the Funds’ possible use of short sales of securities and derivatives, such as options and futures. ● The Funds’ use of derivatives, such as futures, options and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Short-selling involves increased risks and costs. You risk paying more for a security than you received from its sale. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the Funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those Funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those Funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The Funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the prospectus. ● The leveraged and Inverse Emerging Markets Funds’ investments in developed and emerging foreign markets may increase the Funds’ volatility due to the impact of diplomatic, political or economic developments on the country in question. ● Additionally, the Funds’ direct and indirect exposure to foreign currencies subjects the Funds to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currencies. ● A Fund’s investment in the securities of non-U.S. companies in the form of American Depositary Receipts (ADRs) poses special risks associated with international investing, including fluctuating exchange rates, government regulations and differences in liquidity, which may affect the volatility and performance of a fund.
The Emerging Markets Bond Strategy Fund may not be suitable for all investors. Investments in securities, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the Fund may lose money. ● The Fund’s investments in bonds and financial instruments that in combination have economic characteristics similar to emerging markets bonds carries additional risks when compared to investing in U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question. ● The Fund’s investments in derivatives, including credit default swaps, may pose risks in addition to those associated with investing directly in securities or other investments, including illiquidity of the derivatives, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, lack of availability and counterparty risk. To the extent the Fund invests in derivatives to seek to hedge risk or limit leveraged exposure created by other investments, there is no guarantee that such hedging strategies will be effective at managing risk or limiting exposure to leveraged investments. ● The Fund’s exposure to high yield securities may subject the Fund to greater volatility. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund’s investments in bank obligations may expose it to adverse developments in or related to the banking industry. ● The Funds use of leverage will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. ● The Fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● The Fund’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. ● See the prospectus for more information on these and other risks.
| | THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2020 |
The 12-month period ended March 31, 2020, was a wild ride for markets. While the U.S. economy was generally in good shape in 2019, recessionary fears rose throughout the year, prompting the U.S. Federal Reserve (the “Fed”) to announce a rate cut on July 31, the first since 2008, amid growing downside risks to policymakers’ baseline growth and inflation forecasts. Key among those risks were slowing global growth, the threat of additional U.S.-China tariffs, and the possible ramifications surrounding Brexit. The Fed subsequently cut rates twice more in 2019, which caused markets to rally toward the end of the year and into early 2020. Stocks reached new highs and credit spreads tightened to historic levels. Since then, the global outbreak of the coronavirus, COVID-19, has been at the center of everything. As of this writing, COVID-19 has spread to 210 countries, resulted in over 2.5 million cases, and caused over 170,000 deaths. Thus far, the U.S. makes up more than 30% of global cases, and 25% of global deaths. States have required the labor force to work from home if possible, individuals to practice social distancing, and non-essential businesses to shut down.
Closures, quarantines, and social distancing efforts have impacted the travel, hospitality, restaurants, and retail industries, with activity down 100% in some areas of the country. Further exacerbating the decline in output will be reduced business investment, which was already stalling due to falling profits, trade conflicts, and political uncertainty. The coronavirus shock and collapse in oil prices will likely further depress capital expenditures.
In response to the crisis, the Federal Open Market Committee cut rates by a further 125 basis points in the first quarter of 2020 and passed a series of stimulus programs. Among these were the Primary and Secondary Market Corporate Credit Facilities, which are lending programs primarily targeting investment-grade corporate bond issuers, implemented in concert with the U.S. Treasury. It was only after the announcement of this program that corporate credit found some relief from the selloff, but we expect this relief may be temporary.
With an alphabet soup of monetary programs targeting relief from the coronavirus impact, fiscal policy has also stepped up to the plate with a spending bill worth over $2 trillion that aims to assist consumers, states, small businesses, and certain industries. There is no question that these programs will help ease the economic fallout from virus containment measures, but even $2 trillion may be too small given the magnitude of the economic shock that we are facing. Additionally, it is far from clear that fiscal measures are an adequate solution to the issue at hand: the physical impediment to consumer spending. Fiscal and monetary policy can do their part, but ultimately it is public health policy that will likely be the greatest determinant of the economic outlook.
For the 12 months ended March 31, 2020, the Standard & Poor’s 500® (“S&P 500”) Index* returned -6.98%. The decline, while significant, represents something of a recovery in stocks. The S&P 500 peaked at 3,386.15 on February 19, 2020, before plummeting 33.9% to a low of 2,237.40 on March 23, 2020, then recovering some lost ground by the end of the month.
The consensus estimate for S&P 500 earnings per share in 2020 is still around $150. Our research shows S&P 500 earnings per share could fall below $100. Similarly, economists have no way to calibrate how bad the economic data could be based on history. The March U.S. non-farm payrolls report was evidence of this, as it showed a decline in payrolls of 700,000 jobs versus survey expectations of a decline of only 100,000 jobs. We currently expect that second quarter U.S. real gross domestic product (“GDP”) quarter-over-quarter growth could fall by 40% annualized and the unemployment rate could rise to at least 20%. Beyond that, the severity of the crisis depends on containment of the virus and the effectiveness of social distancing measures put in place, but expectations for a quick and sustained V-shaped recovery appear overly optimistic.
For the 12 months ended March 31, 2020, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.92%. The return of the MSCI Emerging Markets Index* was -17.36%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted an 8.93% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -6.94%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.25% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
4 | THE RYDEX FUNDS ANNUAL REPORT | |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2020 |
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
BNY Mellon Emerging Markets 50 ADR Index is capitalization-weighted and designed to track the performance of approximately 50 emerging market-based depositary receipts.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
HFRX Equity Hedge Fund Index is designed to be representative of the overall composition of the equity hedge segment of the hedge fund universe. In an equity hedge strategy both long and short positions primarily in equities are maintained. Equities which are believed to be undervalued are bought and equities which are believed to be overvalued are sold.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
ICE BofA Merrill Lynch U.S. Dollar Emerging Markets Sovereign Plus Index tracks the performance of U.S. dollar-denominated emerging market and crossover sovereign debt publicly issued in the eurobond or U.S. domestic market. Qualifying countries must have a BBB1 or lower foreign currency long-term sovereign debt rating (based on an average of Moody’s, S&P and Fitch). Countries that are not rated, or that are rated “D” or “SD” by one or several rating agencies qualify for inclusion in the index but individual non-performing securities are removed. Qualifying securities must have at least one year remaining term to final maturity, at least 18 months to maturity at point of issuance, a fixed or floating coupon and a minimum amount outstanding of $250 million. Local currency debt is excluded from the Index. Index constituents are capitalization-weighted based on their current amount outstanding times the market price plus accrued interest.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
Morningstar Long/Short Equity Category Average represents long-short portfolios which hold sizable stakes in both long and short positions in equities and related derivatives. Some funds that fall into this category will shift their exposure to long and short positions depending on their macro outlook or the opportunities they uncover through bottom-up research. Some funds may simply hedge long stock positions through exchange traded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.
Morningstar Long/Short Equity Category Average is an average return of the funds in the Morningstar Long/Short Equity Category. The categories assist investors and investment professionals in making meaningful comparisons between funds, making it easier to build well-diversified portfolios, assess potential risk, and identify top-performing funds.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market
| | THE RYDEX FUNDS ANNUAL REPORT | 5 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) | |
The Rydex Emerging Markets 2x Strategy Fund and Rydex Inverse Emerging Markets 2x Strategy Fund are benchmarked daily to leveraged and/or inverse leveraged versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in-line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period on a cumulative basis. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods.
An Example of Compounding
For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6.0% gain and an expectation that the fund will rise by 9.0%. On the same day, the fund’s net asset value per share (“NAV”) increases from $10.00 to $10.90 for a gain of 9.0% — in line with its benchmark.
On day two, assume the index falls from 106 to 99 for a loss of about 6.6%. The fund, as expected, falls 9.9% to a price of $9.82. On each day, the fund performed exactly in line with its benchmark, but for the two-day period, the fund was down 1.8%, while the index was down only 1.0%. Without taking into account the daily compounding of returns, one would expect the fund to lose 1.5% and would see the fund as trailing by 0.3% when in fact it had performed perfectly. This example is summarized in the table below.
| Index
Level | Index
Performance | Fund
Expectation | Fund
NAV | Fund
Performance | Assessment |
Start | 100 | | | $ 10.00 | | |
Day 1 | 106 | 6.0% | 9.0% | $ 10.90 | 9.0% | In line |
Day 2 | 99 | -6.6% | -9.9% | $ 9.82 | -9.9% | In line |
Cumulative | | -1.0% | -1.5% | | -1.8% | -0.3% |
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
6 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) | |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning September 30, 2019 and ending March 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
| | THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 1. Based on actual Fund return3 | | | | | |
Long Short Equity Fund | | | | | |
A-Class | 1.79% | (10.15%) | $ 1,000.00 | $ 898.50 | $ 8.50 |
C-Class | 2.54% | (10.54%) | 1,000.00 | 894.60 | 12.03 |
P-Class | 1.79% | (10.24%) | 1,000.00 | 897.60 | 8.49 |
Institutional Class | 1.54% | (10.12%) | 1,000.00 | 898.80 | 7.31 |
Emerging Markets 2x Strategy Fund | | | | | |
A-Class | 1.86% | (27.33%) | 1,000.00 | 726.70 | 8.03 |
C-Class | 2.61% | (27.60%) | 1,000.00 | 724.00 | 11.25 |
H-Class | 1.88% | (27.36%) | 1,000.00 | 726.40 | 8.11 |
Inverse Emerging Markets 2x Strategy Fund | | | | | |
A-Class | 1.89% | 8.47% | 1,000.00 | 1,084.70 | 9.85 |
C-Class | 2.84% | 9.56% | 1,000.00 | 1,095.60 | 14.88 |
H-Class | 1.86% | 8.53% | 1,000.00 | 1,085.30 | 9.70 |
Emerging Markets Bond Strategy Fund | | | | | |
A-Class | 1.69% | (10.60%) | 1,000.00 | 894.00 | 8.00 |
C-Class | 2.43% | (10.95%) | 1,000.00 | 890.50 | 11.48 |
H-Class | 1.68% | (10.64%) | 1,000.00 | 893.60 | 7.95 |
8 | THE RYDEX FUNDS ANNUAL REPORT | |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) | |
| Expense
Ratio1 | Fund
Return | Beginning
Account Value
September 30, 2019 | Ending
Account Value
March 31, 2020 | Expenses
Paid During
Period2 |
Table 2. Based on hypothetical 5% return (before expenses) | | | | |
Long Short Equity Fund | | | | | |
A-Class | 1.79% | 5.00% | $ 1,000.00 | $ 1,016.05 | $ 9.02 |
C-Class | 2.54% | 5.00% | 1,000.00 | 1,012.30 | 12.78 |
P-Class | 1.79% | 5.00% | 1,000.00 | 1,016.05 | 9.02 |
Institutional Class | 1.54% | 5.00% | 1,000.00 | 1,017.30 | 7.77 |
Emerging Markets 2x Strategy Fund | | | | | |
A-Class | 1.86% | 5.00% | 1,000.00 | 1,015.70 | 9.37 |
C-Class | 2.61% | 5.00% | 1,000.00 | 1,011.95 | 13.13 |
H-Class | 1.88% | 5.00% | 1,000.00 | 1,015.60 | 9.47 |
Inverse Emerging Markets 2x Strategy Fund | | | | | |
A-Class | 1.89% | 5.00% | 1,000.00 | 1,015.55 | 9.52 |
C-Class | 2.84% | 5.00% | 1,000.00 | 1,010.80 | 14.28 |
H-Class | 1.86% | 5.00% | 1,000.00 | 1,015.70 | 9.37 |
Emerging Markets Bond Strategy Fund | | | | | |
A-Class | 1.69% | 5.00% | 1,000.00 | 1,016.55 | 8.52 |
C-Class | 2.43% | 5.00% | 1,000.00 | 1,012.85 | 12.23 |
H-Class | 1.68% | 5.00% | 1,000.00 | 1,016.60 | 8.47 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
3 | Actual cumulative return at net asset value for the period September 30, 2019 to March 31, 2020. |
| | THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
LONG SHORT EQUITY FUND
OBJECTIVE: Seeks long-term capital appreciation.
For the one-year period ended March 31, 2020, the Long Short Equity Fund P-Class returned -12.17%. The two benchmarks used by the Fund in the period, the Morningstar Long/Short Equity Category Average and the S&P 500 Index, returned -9.60% and -6.98%, respectively, for the same one-year period.
Investment Approach
The Fund is managed as an opportunistic long/short strategy, which employs forward-looking, fundamental analysis to measure the market’s expected return for each stock in the universe. Quantitative techniques are then applied to evaluate market- and company-specific risk factors embedded in each stock and to assess which specific risk factors (such as size, growth, or sectors) are being overvalued or undervalued by the market. Finally, a portfolio is constructed within guidelines that is long the stocks that give the portfolio both the broad risk characteristics and company-specific risks that are perceived to be undervalued and is short stocks for which those characteristics are perceived to be overpriced.
The Fund will ordinarily hold simultaneous long and short positions in equity securties or securities markets that provide exposure up to a level equal to 200% of the Fund’s net assets for the long and 150% of the Fund’s net assets for the short positions. The Fund intends to maintain a hedged overall net exposure (the difference between the notional value of long positions and the notional value of short positions), typically varying between 0% and 80% net long, in order to maintain lower-than-market volatility and beta, and to seek to provide consistent return above an approximately 30% market weighted internal benchmark. The overall net exposure will change as market opportunities change and may, based on the Fund’s view of current market conditions, be outside this range.
Derivatives in the Fund are used to take short positions as well as long exposure above 100% of NAV (that is, to take leverage). The performance discussion below referencing short position performance would be entirely due to total return swap derivatives, and performance of long positions would be partially due to total return swap derivatives.
Performance Review
For most of 2019, the stock market continued a strong and steady ascent with just a few short-lived dips. As global growth expectations decreased, while the risk of trade conflict escalation and a disorderly Brexit increased, investors continued moving towards safer assets, such as long-term U.S. Treasurys and high-quality stocks. In August, the yield curve between the 2-year and 10-year U.S. Treasury rates briefly inverted, a historical indicator that has presaged past recessions. The markets took the clues and began punishing a whole host of more cyclical industries, while groups with any sort of organic growth (whether profitable or not) became market favorites. The U.S. Federal Reserve by then had fully abandoned 2018’s hawkish stance and cut short-term rates multiple times during 2019, calling it a “midcycle adjustment to policy.” Before 2019 was over, two political risk events suddenly cleared up. A Phase One trade deal was signed with China, and a new election in the UK seemed to have resolved the muddy Brexit saga. The resolution of these major uncertainties contributed to strong U.S. stock market moves higher through early 2020. From March 31, 2019, through January 31, 2020, the S&P 500 benchmark achieved a roughly 15.6% return.
At that same point, 10 months into the period, the Fund had lost roughly -3%. Despite being long biased, the Fund’s strategy had failed to provide any of the market upside as its long positions suffered from stagnation (particularly the Energy, Industrials, Discretionary, Staples, and Media names underperforming the market), while its short positions of the more expensive nature (particularly in REITs, Financials, and IT) outperformed the market. The big undertone of this poor performance was fundamental style positioning that was not moving the Fund’s way (more on that style performance below).
The narrative of continuing economic strength from early 2020 now seems like a distant memory, as the rapid spread of the COVID-19 pandemic quickly changed the markets and world economic situation. The months of February and March 2020 closed out the fiscal year with sharp drops in the equity markets and extreme volatility. The daily moves (in both directions) exceeded several records that had held for 30-70 years. Over those last two months, the S&P 500 Index dropped about -19.6%. The Fund endured a -8.9% return over that same period, less than half the drop of the broad market. For this period, the long side roughly matched the intensity of the broad market drop, but the average short position fell considerably more (averaging about -33% returns), providing some protection when needed the most. The pandemic represented one of those exogenous events that a pure quantitative approach can struggle with, as the modelling of fundamental impacts and economic signals are so uncertain. Indeed, when looking at single name correlations, a hidden ‘pandemic’ factor quickly emerged related to names with heavy exposure
10 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (continued) | March 31, 2020 |
to the stay-at-home closures (travel companies, real estate related to retail businesses, and oil & gas producers). This factor is hard to model—its riskiness hard to predict—and of course will be transient once the world recuperates and finds effective virus-fighting medical solutions. During the month of March, the portfolio managers took discretion to both decrease exposure to this new ‘pandemic factor’ on both the long side (selling of travel names, selling of low volatility names that held up) and on the short side (particularly by closing some battered REIT and bank shorts). This action was taken amid the volatile weeks in March by taking advantage of some of the big oversold days, and rapid rebounds. The trades ended up both reducing gross positioning and adding some modest profit and loss.
At period end, the Fund held about 119% of assets in long securities, and 59% short, for a net-dollar exposure of 60%. The net exposure averaged 58% during the year (ranging between 53% and 63%). Usually, the Fund has gross exposure (the sum of long positions and short positions) around 240%-250%, but with the dramatic increase in market volatility, we brought down the size of many positions on both sides to a total of under 180% while maintaining a similar net market exposure.
The realized net beta (sensitivity of daily Fund returns to the S&P 500 index) averaged around 0.49 during the year. The long positions (on a standalone unlevered basis) averaged a return of -17.1%, compared to the Russell 3000 index return of -8.8%. Short positions returned -19.6% on a stand-alone basis. The underwhelming total return results for the year stemmed mostly from poor alpha on the long side, while shorts ended up with worse-than-market-like total return, serving as a decent hedge with alpha generation on the short side.
The Fund’s fundamental style tilts were the primary negative contributor to the period’s returns, as a bias towards value names and away from high growth companies both underperformed. While the current pandemic situation is clearly the number one worry for global markets, for a fundamentals-based long/short strategy like the Fund uses, the biggest challenge continues to be the unprecedented persistence of value names underperforming expensive stocks. The magnitude of cumulative value style underperformance has reached historic levels last seen in the 1999 tech bubble. The recent pandemic reaction (including very low interest rates and forced economic slowdown) has only exacerbated the investing public’s shunning of any name with economic sensitivity, and the related embrace of technology-related growth stories (regardless of profits). History also shows that strong momentum as we have seen can create crowding in narrow market leaders, and that crowding can turn into a rush to exit as soon as the leading names disappoint the most optimistic expectations.
The Fund’s strategy is to determine attractiveness of broad groups of stocks relative to their fundamentals. The value factor has seen its risk premium (or embedded valuation) improve as the returns have struggled—implying that the valuation of the stocks (both cheaper and expensive) have spread much further than fundamentals of the companies. To what extent this ‘behavioral’ cycle will continue is a key question—and one that is very difficult to answer. In every market environment there are elements of the macro-economic cycle that are somewhat predictable, and elements that are new and completely unpredictable (pandemic, global quantitative easing, negative rates, and trade conflicts being unique situations this time around). These unique elements can drive market sentiment in ways that are hard to predict or time.
Focusing on corporate fundamentals tends to produce slightly more predictability. Companies must invest in operations and research to produce sales and earnings—and there are some bounds on how much and how little the companies can earn on that capital before competition comes in to erode them. Given some bounded limits on corporate earnings power, we believe that the valuations awarded the most expensive tiers of the equity market have far surpassed the likely long-term earnings power.
We find some comfort during a poor relative performance period in knowing that, in past periods of value drawdown, the forward performance of the factor has been tremendous due to the rewinding of all the excess valuations.
Positioning
At period end, the Fund’s net dollar exposure was 60%. The Fund maintains its large style bias towards cheaper valuation names along with quality biases towards free cash flow and higher profitability—both of which are styles that have historically helped protect against macro risk in the event of recession.
From an industry perspective, the Fund now holds a underweight in the Technology sector after prior years of being positioned quite long. The flip in exposure occurred during this year in response to relative attractiveness of the names vis-à-vis other sector opportunities. The net short in Financials has begun to shrink after remaining quite negative for a few years. The largest sector net long exposures are in Healthcare, Consumer Staples, and Industrials. The largest net short exposures exist in Real Estate, Materials, and Financials sectors.
Performance displayed represents past performance, which is no guarantee of future results.
| | THE RYDEX FUNDS ANNUAL REPORT | 11 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (continued) | March 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
Institutional Class | November 30, 2011 |
A-Class | March 31, 2004 |
C-Class | March 22, 2002 |
P-Class | March 22, 2002 |
Ten Largest Holdings (% of Total Net Assets) |
Alphabet, Inc. — Class C | 1.3% |
Johnson & Johnson | 1.1% |
Verizon Communications, Inc. | 1.1% |
Procter & Gamble Co. | 1.1% |
Kimberly-Clark Corp. | 1.0% |
Merck & Company, Inc. | 1.0% |
Omnicom Group, Inc. | 1.0% |
McKesson Corp. | 1.0% |
Pfizer, Inc. | 1.0% |
Gilead Sciences, Inc. | 1.0% |
Top Ten Total | 10.6% |
| | |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
12 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | 10 Year |
A-Class Shares | (12.15%) | (2.17%) | 1.45% |
A-Class Shares with sales charge‡ | (16.33%) | (3.12%) | 0.95% |
C-Class Shares | (12.81%) | (2.90%) | 0.69% |
C-Class Shares with CDSC§ | (13.68%) | (2.90%) | 0.69% |
P-Class Shares | (12.17%) | (2.17%) | 1.44% |
Morningstar Long/Short Equity Category Average** | (9.60%) | (0.62%) | 2.70% |
S&P 500 Index** | (6.98%) | 6.73% | 10.53% |
| 1 Year | 5 Year | Since
Inception
(11/30/11) |
Institutional Class Shares | (11.96%) | (1.92%) | 2.22% |
Morningstar Long/Short Equity Category Average** | (9.60%) | (0.62%) | 2.81% |
S&P 500 Index** | (6.98%) | 6.73% | 10.25% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Morningstar Long/Short Equity Category Average and S&P 500 Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The Morningstar Long/Short Equity Category Average is the equal-weighted, simple average daily return for all funds in the Morningstar Long/Short Equity Category. The graphs are based on A-Class shares and P-Class shares only; performance for C-Class shares and Institutional Class shares will vary due to differences in fee structure. |
** | Effective May 31, 2017, the Fund changed its principal investment strategy. As a result of the investment strategy change, the Fund’s new benchmarks are the Morningstar Long/Short Equity Category Average and S&P 500® Index. Prior to May 31, 2017, the Fund’s benchmark was the HFRX Equity Hedge Index and Russell 3000 Index. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 80.5% |
| | | | | | | | | |
Consumer, Non-cyclical - 25.8% |
Johnson & Johnson1 | | | 1,266 | | | $ | 166,011 | |
Procter & Gamble Co.1 | | | 1,413 | | | | 155,430 | |
Kimberly-Clark Corp.1 | | | 1,197 | | | | 153,060 | |
Merck & Company, Inc.1 | | | 1,976 | | | | 152,034 | |
McKesson Corp. | | | 1,094 | | | | 147,974 | |
Pfizer, Inc.1 | | | 4,430 | | | | 144,595 | |
Gilead Sciences, Inc.1 | | | 1,924 | | | | 143,838 | |
Eli Lilly & Co.1 | | | 1,014 | | | | 140,662 | |
Amgen, Inc.1 | | | 686 | | | | 139,073 | |
Medtronic plc | | | 1,343 | | | | 121,112 | |
JM Smucker Co.1 | | | 1,079 | | | | 119,769 | |
Molson Coors Beverage Co. — Class B1 | | | 2,850 | | | | 111,178 | |
General Mills, Inc.1 | | | 2,011 | | | | 106,120 | |
Abbott Laboratories | | | 1,299 | | | | 102,504 | |
Kellogg Co. | | | 1,689 | | | | 101,323 | |
Sysco Corp.1 | | | 2,041 | | | | 93,131 | |
Post Holdings, Inc.* | | | 1,111 | | | | 92,180 | |
CVS Health Corp.1 | | | 1,464 | | | | 86,859 | |
Coca-Cola Co. | | | 1,958 | | | | 86,642 | |
Cardinal Health, Inc. | | | 1,682 | | | | 80,635 | |
PepsiCo, Inc.1 | | | 636 | | | | 76,384 | |
Philip Morris International, Inc.1 | | | 1,031 | | | | 75,222 | |
Becton Dickinson and Co.1 | | | 300 | | | | 68,931 | |
Hologic, Inc.*,1 | | | 1,951 | | | | 68,480 | |
Jazz Pharmaceuticals plc* | | | 585 | | | | 58,348 | |
TreeHouse Foods, Inc.* | | | 1,319 | | | | 58,234 | |
Edwards Lifesciences Corp.* | | | 307 | | | | 57,906 | |
John B Sanfilippo & Son, Inc. | | | 641 | | | | 57,305 | |
United Therapeutics Corp.* | | | 587 | | | | 55,662 | |
Ingredion, Inc.1 | | | 706 | | | | 53,303 | |
Mondelez International, Inc. — Class A | | | 997 | | | | 49,930 | |
Archer-Daniels-Midland Co. | | | 1,349 | | | | 47,458 | |
STERIS plc | | | 329 | | | | 46,050 | |
Integer Holdings Corp.* | | | 725 | | | | 45,573 | |
Cal-Maine Foods, Inc. | | | 1,032 | | | | 45,387 | |
Baxter International, Inc.1 | | | 546 | | | | 44,330 | |
BioMarin Pharmaceutical, Inc.* | | | 512 | | | | 43,264 | |
Alexion Pharmaceuticals, Inc.* | | | 481 | | | | 43,189 | |
Thermo Fisher Scientific, Inc.1 | | | 148 | | | | 41,973 | |
Herbalife Nutrition Ltd.* | | | 1,340 | | | | 39,074 | |
Innoviva, Inc.* | | | 3,169 | | | | 37,268 | |
Illumina, Inc.* | | | 136 | | | | 37,144 | |
Conagra Brands, Inc. | | | 1,196 | | | | 35,091 | |
Halozyme Therapeutics, Inc.* | | | 1,865 | | | | 33,551 | |
Macquarie Infrastructure Corp. | | | 1,328 | | | | 33,532 | |
Zoetis, Inc. | | | 249 | | | | 29,305 | |
Laboratory Corporation of America Holdings* | | | 222 | | | | 28,059 | |
Henry Schein, Inc.* | | | 490 | | | | 24,755 | |
Zimmer Biomet Holdings, Inc.1 | | | 225 | | | | 22,743 | |
Total Consumer, Non-cyclical | | | | | | | 3,801,581 | |
| | | | | | | | | |
Industrial - 16.2% |
FedEx Corp.1 | | | 1,041 | | | | 126,232 | |
Honeywell International, Inc.1 | | | 847 | | | | 113,320 | |
CH Robinson Worldwide, Inc. | | | 1,601 | | | | 105,986 | |
Caterpillar, Inc.1 | | | 841 | | | | 97,590 | |
Eaton Corporation plc | | | 1,195 | | | | 92,839 | |
Norfolk Southern Corp.1 | | | 628 | | | | 91,688 | |
Werner Enterprises, Inc. | | | 2,370 | | | | 85,936 | |
Landstar System, Inc. | | | 884 | | | | 84,740 | |
Lincoln Electric Holdings, Inc.1 | | | 1,224 | | | | 84,456 | |
CSX Corp. | | | 1,403 | | | | 80,392 | |
Kansas City Southern1 | | | 607 | | | | 77,198 | |
Mettler-Toledo International, Inc.* | | | 106 | | | | 73,194 | |
Crane Co. | | | 1,480 | | | | 72,786 | |
Gentex Corp. | | | 3,206 | | | | 71,045 | |
Emerson Electric Co.1 | | | 1,440 | | | | 68,616 | |
Illinois Tool Works, Inc. | | | 476 | | | | 67,649 | |
Waters Corp.*,1 | | | 360 | | | | 65,538 | |
Union Pacific Corp.1 | | | 456 | | | | 64,314 | |
Regal Beloit Corp. | | | 1,019 | | | | 64,146 | |
Rockwell Automation, Inc. | | | 392 | | | | 59,157 | |
Masco Corp. | | | 1,614 | | | | 55,796 | |
J.B. Hunt Transport Services, Inc. | | | 535 | | | | 49,343 | |
Heartland Express, Inc. | | | 2,463 | | | | 45,738 | |
Marten Transport Ltd. | | | 2,201 | | | | 45,164 | |
Echo Global Logistics, Inc.* | | | 2,595 | | | | 44,323 | |
Kennametal, Inc. | | | 2,179 | | | | 40,573 | |
Schneider National, Inc. — Class B | | | 2,097 | | | | 40,556 | |
Garmin Ltd. | | | 527 | | | | 39,504 | |
Old Dominion Freight Line, Inc. | | | 291 | | | | 38,197 | |
Textron, Inc.1 | | | 1,410 | | | | 37,605 | |
Westrock Co. | | | 1,191 | | | | 33,658 | |
Oshkosh Corp. | | | 523 | | | | 33,645 | |
Albany International Corp. — Class A | | | 688 | | | | 32,563 | |
AGCO Corp. | | | 664 | | | | 31,374 | |
Knight-Swift Transportation Holdings, Inc. | | | 936 | | | | 30,701 | |
Arconic, Inc.* | | | 1,784 | | | | 28,651 | |
Terex Corp. | | | 1,846 | | | | 26,508 | |
General Dynamics Corp. | | | 186 | | | | 24,610 | |
Vishay Intertechnology, Inc. | | | 1,661 | | | | 23,935 | |
MasTec, Inc.* | | | 712 | | | | 23,304 | |
General Electric Co. | | | 2,830 | | | | 22,470 | |
Total Industrial | | | | | | | 2,395,040 | |
| | | | | | | | | |
Communications - 9.7% |
Alphabet, Inc. — Class C* | | | 162 | | | | 188,375 | |
Verizon Communications, Inc.1 | | | 2,970 | | | | 159,578 | |
Omnicom Group, Inc.1 | | | 2,752 | | | | 151,085 | |
Facebook, Inc. — Class A*,1 | | | 737 | | | | 122,932 | |
AT&T, Inc.1 | | | 3,740 | | | | 109,021 | |
Amazon.com, Inc.*,1 | | | 53 | | | | 103,335 | |
Discovery, Inc. — Class A*,1 | | | 3,147 | | | | 61,178 | |
Charter Communications, Inc. — Class A* | | | 132 | | | | 57,593 | |
News Corp. — Class A | | | 6,397 | | | | 57,413 | |
Booking Holdings, Inc.* | | | 42 | | | | 56,504 | |
Cisco Systems, Inc. | | | 1,367 | | | | 53,737 | |
AMC Networks, Inc. — Class A* | | | 2,018 | | | | 49,057 | |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | Shares | | | Value | |
Altice USA, Inc. — Class A* | | | 2,051 | | | $ | 45,717 | |
GCI Liberty, Inc. — Class A* | | | 802 | | | | 45,690 | |
Comcast Corp. — Class A | | | 1,310 | | | | 45,038 | |
Yelp, Inc. — Class A* | | | 2,265 | | | | 40,838 | |
eBay, Inc. | | | 1,270 | | | | 38,176 | |
Scholastic Corp. | | | 994 | | | | 25,337 | |
Walt Disney Co. | | | 231 | | | | 22,314 | |
Total Communications | | | | | | | 1,432,918 | |
| | | | | | | | | |
Consumer, Cyclical - 9.3% |
Southwest Airlines Co.1 | | | 2,537 | | | | 90,342 | |
Home Depot, Inc.1 | | | 417 | | | | 77,858 | |
Starbucks Corp. | | | 1,088 | | | | 71,525 | |
Cummins, Inc.1 | | | 474 | | | | 64,142 | |
Allison Transmission Holdings, Inc.1 | | | 1,839 | | | | 59,970 | |
General Motors Co. | | | 2,822 | | | | 58,641 | |
DR Horton, Inc. | | | 1,723 | | | | 58,582 | |
Lear Corp.1 | | | 666 | | | | 54,113 | |
Whirlpool Corp. | | | 593 | | | | 50,879 | |
Gentherm, Inc.* | | | 1,616 | | | | 50,742 | |
Brunswick Corp. | | | 1,427 | | | | 50,473 | |
Toll Brothers, Inc. | | | 2,614 | | | | 50,320 | |
Autoliv, Inc. | | | 1,079 | | | | 49,645 | |
Aptiv plc | | | 879 | | | | 43,282 | |
BorgWarner, Inc. | | | 1,760 | | | | 42,891 | |
Lowe’s Companies, Inc. | | | 485 | | | | 41,734 | |
PulteGroup, Inc. | | | 1,622 | | | | 36,203 | |
MSC Industrial Direct Company, Inc. — Class A | | | 650 | | | | 35,731 | |
Wyndham Destinations, Inc. | | | 1,440 | | | | 31,248 | |
Lennar Corp. — Class A | | | 807 | | | | 30,827 | |
Extended Stay America, Inc. | | | 3,960 | | | | 28,948 | |
Carnival Corp. | | | 2,121 | | | | 27,933 | |
Walgreens Boots Alliance, Inc. | | | 604 | | | | 27,633 | |
Walmart, Inc. | | | 240 | | | | 27,269 | |
Costco Wholesale Corp. | | | 94 | | | | 26,802 | |
Polaris, Inc. | | | 531 | | | | 25,568 | |
Las Vegas Sands Corp. | | | 582 | | | | 24,718 | |
VF Corp. | | | 455 | | | | 24,606 | |
Delta Air Lines, Inc. | | | 844 | | | | 24,079 | |
Hilton Worldwide Holdings, Inc. | | | 298 | | | | 20,335 | |
Mohawk Industries, Inc.* | | | 263 | | | | 20,051 | |
SkyWest, Inc. | | | 707 | | | | 18,516 | |
Allegiant Travel Co. — Class A | | | 212 | | | | 17,342 | |
JetBlue Airways Corp.* | | | 1,568 | | | | 14,034 | |
Total Consumer, Cyclical | | | | | | | 1,376,982 | |
| | | | | | | | | |
Utilities - 8.3% |
Public Service Enterprise Group, Inc. | | | 2,388 | | | | 107,245 | |
FirstEnergy Corp.1 | | | 2,661 | | | | 106,626 | |
NRG Energy, Inc.1 | | | 3,688 | | | | 100,535 | |
Exelon Corp.1 | | | 2,721 | | | | 100,160 | |
PPL Corp.1 | | | 3,899 | | | | 96,227 | |
AES Corp. | | | 6,800 | | | | 92,480 | |
Southern Co.1 | | | 1,623 | | | | 87,869 | |
National Fuel Gas Co.1 | | | 2,353 | | | | 87,743 | |
Vistra Energy Corp.1 | | | 4,899 | | | | 78,188 | |
Evergy, Inc.1 | | | 1,303 | | | | 71,730 | |
Pinnacle West Capital Corp.1 | | | 941 | | | | 71,318 | |
Portland General Electric Co. | | | 1,232 | | | | 59,062 | |
ALLETE, Inc. | | | 875 | | | | 53,095 | |
OGE Energy Corp. | | | 1,235 | | | | 37,952 | |
Entergy Corp. | | | 375 | | | | 35,239 | |
NiSource, Inc. | | | 1,079 | | | | 26,943 | |
Avista Corp. | | | 309 | | | | 13,130 | |
Total Utilities | | | | | | | 1,225,542 | |
| | | | | | | | | |
Financial - 4.4% |
Lexington Realty Trust REIT | | | 11,508 | | | | 114,274 | |
Berkshire Hathaway, Inc. — Class B* | | | 405 | | | | 74,046 | |
JPMorgan Chase & Co. | | | 641 | | | | 57,709 | |
Weingarten Realty Investors REIT | | | 3,713 | | | | 53,579 | |
Bank of America Corp. | | | 2,426 | | | | 51,504 | |
Sunstone Hotel Investors, Inc. REIT | | | 4,914 | | | | 42,801 | |
Brixmor Property Group, Inc. REIT | | | 4,265 | | | | 40,517 | |
Summit Hotel Properties, Inc. REIT | | | 9,462 | | | | 39,930 | |
Kennedy-Wilson Holdings, Inc. | | | 2,704 | | | | 36,288 | |
Visa, Inc. — Class A | | | 204 | | | | 32,868 | |
Travelers Companies, Inc. | | | 278 | | | | 27,619 | |
Mastercard, Inc. — Class A | | | 110 | | | | 26,572 | |
Northern Trust Corp. | | | 315 | | | | 23,770 | |
Wells Fargo & Co. | | | 637 | | | | 18,282 | |
Citigroup, Inc. | | | 282 | | | | 11,878 | |
Total Financial | | | | | | | 651,637 | |
| | | | | | | | | |
Technology - 3.8% |
Microsoft Corp.1 | | | 830 | | | | 130,899 | |
Apple, Inc.1 | | | 497 | | | | 126,382 | |
Activision Blizzard, Inc. | | | 1,574 | | | | 93,622 | |
Oracle Corp.1 | | | 1,059 | | | | 51,181 | |
Intel Corp.1 | | | 571 | | | | 30,903 | |
NVIDIA Corp. | | | 115 | | | | 30,314 | |
Adobe, Inc.* | | | 82 | | | | 26,096 | |
Teradata Corp.* | | | 1,262 | | | | 25,858 | |
QUALCOMM, Inc. | | | 315 | | | | 21,310 | |
Micron Technology, Inc.* | | | 390 | | | | 16,403 | |
Total Technology | | | | | | | 552,968 | |
| | | | | | | | | |
Energy - 2.6% |
Exxon Mobil Corp.1 | | | 2,518 | | | | 95,608 | |
Chevron Corp. | | | 1,047 | | | | 75,866 | |
Kinder Morgan, Inc.1 | | | 3,131 | | | | 43,584 | |
Valero Energy Corp.1 | | | 775 | | | | 35,154 | |
HollyFrontier Corp.1 | | | 1,308 | | | | 32,059 | |
Delek US Holdings, Inc. | | | 1,647 | | | | 25,957 | |
CVR Energy, Inc. | | | 1,393 | | | | 23,026 | |
Phillips 661 | | | 404 | | | | 21,674 | |
ConocoPhillips | | | 662 | | | | 20,390 | |
Devon Energy Corp. | | | 2,255 | | | | 15,582 | |
Total Energy | | | | | | | 388,900 | |
| | | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | Shares | | | Value | |
Basic Materials - 0.4% |
International Paper Co. | | | 944 | | | $ | 29,387 | |
Domtar Corp. | | | 1,039 | | | | 22,484 | |
Total Basic Materials | | | | | | | 51,871 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $14,247,072) | | | | | | | 11,877,439 | |
| | | | | | | | | |
MONEY MARKET FUND† - 12.6% |
Invesco Short-Term Investments Trust Treasury Obligations Portfolio Institutional Class 0.63%3 | | | 1,855,620 | | | | 1,855,620 | |
Total Money Market Fund | | | | |
(Cost $1,855,620) | | | | | | | 1,855,620 | |
| | | | | | | | | |
Total Investments - 93.1% | | | | |
(Cost $16,100,543) | | $ | 13,733,059 | |
Other Assets & Liabilities, net - 6.9% | | | 1,018,188 | |
Total Net Assets - 100.0% | | $ | 14,751,247 | |
Custom Basket Swap Agreements |
Counterparty | Reference Obligation | Financing Rate
Pay (Receive) | Payment
Frequency | | Maturity
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
OTC Custom Basket Swap Agreements †† |
Goldman Sachs International | GS Equity Custom Basket | 0.54% (Federal Funds Rate+ 0.45%) | At Maturity | | | 05/06/24 | | | $ | 2,992,359 | | | $ | (764,713 | ) |
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | 0.50% (Federal Funds Rate+ 0.40%) | At Maturity | | | 03/27/24 | | | | 3,009,908 | | | | (776,545 | ) |
| | | | | | | | | | $ | 6,002,267 | | | $ | (1,541,258 | ) |
OTC Custom Basket Swap Agreements Sold Short †† |
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | (0.20%) (Federal Funds Rate - 0.30%) | At Maturity | | | 03/27/24 | | | $ | 4,568,212 | | | $ | 560,203 | |
Goldman Sachs International | GS Equity Custom Basket | (0.11%) (Federal Funds Rate - 0.20%) | At Maturity | | | 05/06/24 | | | | 4,304,376 | | | | 618,075 | |
| | | | | | | | | | $ | 8,872,588 | | | $ | 1,178,278 | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| GS EQUITY LONG CUSTOM BASKET |
| Technology | | | | | | | | | | | | |
| Microsoft Corp. | | | 230 | | | | 1.21 | % | | $ | 5,874 | |
| Apple, Inc. | | | 138 | | | | 1.17 | % | | | 4,326 | |
| Activision Blizzard, Inc. | | | 437 | | | | 0.87 | % | | | 1,854 | |
| Intel Corp. | | | 158 | | | | 0.29 | % | | | 1,149 | |
| NVIDIA Corp. | | | 32 | | | | 0.28 | % | | | 665 | |
| Adobe, Inc. | | | 22 | | | | 0.23 | % | | | (478 | ) |
| Micron Technology, Inc. | | | 108 | | | | 0.15 | % | | | (504 | ) |
| QUALCOMM, Inc. | | | 87 | | | | 0.20 | % | | | (699 | ) |
| Oracle Corp. | | | 294 | | | | 0.47 | % | | | (1,646 | ) |
| Teradata Corp. | | | 350 | | | | 0.24 | % | | | (2,952 | ) |
| Total Technology | | | | | | | | | | | 7,589 | |
| Industrial | | | | | | | | | | | | |
| Werner Enterprises, Inc. | | | 711 | | | | 0.86 | % | | | 3,728 | |
| Old Dominion Freight Line, Inc. | | | 81 | | | | 0.36 | % | | | 3,032 | |
| Marten Transport Ltd. | | | 611 | | | | 0.42 | % | | | 1,607 | |
| Schneider National, Inc. — Class B | | | 419 | | | | 0.27 | % | | | 578 | |
| Knight-Swift Transportation Holdings, Inc. | | | 234 | | | | 0.26 | % | | | 407 | |
| Heartland Express, Inc. | | | 683 | | | | 0.42 | % | | | (109 | ) |
| Vishay Intertechnology, Inc. | | | 461 | | | | 0.22 | % | | | (664 | ) |
| Mettler-Toledo International, Inc. | | | 29 | | | | 0.67 | % | | | (1,040 | ) |
| Garmin Ltd. | | | 146 | | | | 0.37 | % | | | (1,247 | ) |
| Landstar System, Inc. | | | 245 | | | | 0.78 | % | | | (1,553 | ) |
| Westrock Co. | | | 595 | | | | 0.56 | % | | | (1,780 | ) |
| Oshkosh Corp. | | | 145 | | | | 0.31 | % | | | (1,872 | ) |
| Union Pacific Corp. | | | 126 | | | | 0.59 | % | | | (2,022 | ) |
| Regal Beloit Corp. | | | 283 | | | | 0.60 | % | | | (2,114 | ) |
| Echo Global Logistics, Inc. | | | 720 | | | | 0.41 | % | | | (2,446 | ) |
| General Dynamics Corp. | | | 51 | | | | 0.23 | % | | | (2,510 | ) |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| Caterpillar, Inc. | | | 233 | | | | 0.90 | % | | $ | (2,927 | ) |
| General Electric Co. | | | 785 | | | | 0.21 | % | | | (3,125 | ) |
| Waters Corp. | | | 100 | | | | 0.61 | % | | | (3,205 | ) |
| J.B. Hunt Transport Services, Inc. | | | 148 | | | | 0.46 | % | | | (3,574 | ) |
| Gentex Corp. | | | 890 | | | | 0.66 | % | | | (3,861 | ) |
| Lincoln Electric Holdings, Inc. | | | 339 | | | | 0.78 | % | | | (4,754 | ) |
| Illinois Tool Works, Inc. | | | 132 | | | | 0.63 | % | | | (4,937 | ) |
| AGCO Corp. | | | 184 | | | | 0.29 | % | | | (5,263 | ) |
| Albany International Corp. — Class A | | | 191 | | | | 0.30 | % | | | (5,615 | ) |
| Masco Corp. | | | 448 | | | | 0.52 | % | | | (5,757 | ) |
| Eaton Corporation plc | | | 331 | | | | 0.86 | % | | | (5,790 | ) |
| MasTec, Inc. | | | 197 | | | | 0.22 | % | | | (5,849 | ) |
| Rockwell Automation, Inc. | | | 108 | | | | 0.54 | % | | | (6,071 | ) |
| CH Robinson Worldwide, Inc. | | | 444 | | | | 0.98 | % | | | (6,387 | ) |
| Norfolk Southern Corp. | | | 174 | | | | 0.85 | % | | | (6,683 | ) |
| Arconic, Inc. | | | 495 | | | | 0.27 | % | | | (6,811 | ) |
| CSX Corp. | | | 389 | | | | 0.74 | % | | | (7,211 | ) |
| FedEx Corp. | | | 206 | | | | 0.83 | % | | | (7,329 | ) |
| Terex Corp. | | | 512 | | | | 0.25 | % | | | (7,416 | ) |
| Honeywell International, Inc. | | | 235 | | | | 1.05 | % | | | (8,378 | ) |
| Kennametal, Inc. | | | 605 | | | | 0.38 | % | | | (8,543 | ) |
| Textron, Inc. | | | 470 | | | | 0.42 | % | | | (9,388 | ) |
| Emerson Electric Co. | | | 399 | | | | 0.64 | % | | | (9,933 | ) |
| Crane Co. | | | 649 | | | | 1.07 | % | | | (15,755 | ) |
| Total Industrial | | | | | | | | | | | (162,567 | ) |
| Energy | | | | | | | | | | | | |
| Phillips 66 | | | 112 | | | | 0.20 | % | | | (3,479 | ) |
| ConocoPhillips | | | 183 | | | | 0.19 | % | | | (4,189 | ) |
| HollyFrontier Corp. | | | 363 | | | | 0.30 | % | | | (5,812 | ) |
| Kinder Morgan, Inc. | | | 869 | | | | 0.40 | % | | | (5,942 | ) |
| Valero Energy Corp. | | | 215 | | | | 0.33 | % | | | (6,665 | ) |
| Delek US Holdings, Inc. | | | 457 | | | | 0.24 | % | | | (8,984 | ) |
| Devon Energy Corp. | | | 626 | | | | 0.14 | % | | | (9,322 | ) |
| CVR Energy, Inc. | | | 386 | | | | 0.21 | % | | | (11,371 | ) |
| Chevron Corp. | | | 290 | | | | 0.70 | % | | | (14,164 | ) |
| Exxon Mobil Corp. | | | 699 | | | | 0.89 | % | | | (24,152 | ) |
| Total Energy | | | | | | | | | | | (94,080 | ) |
| Communications | | | | | | | | | | | | |
| Amazon.com, Inc. | | | 14 | | | | 0.91 | % | | | 2,903 | |
| Alphabet, Inc. — Class C | | | 49 | | | | 1.90 | % | | | 1,008 | |
| Scholastic Corp. | | | 276 | | | | 0.24 | % | | | (2,081 | ) |
| Facebook, Inc. — Class A | | | 180 | | | | 1.00 | % | | | (2,154 | ) |
| Charter Communications, Inc. — Class A | | | 36 | | | | 0.52 | % | | | (2,556 | ) |
| Verizon Communications, Inc. | | | 824 | | | | 1.48 | % | | | (2,646 | ) |
| Walt Disney Co. | | | 64 | | | | 0.21 | % | | | (3,219 | ) |
| Altice USA, Inc. — Class A | | | 569 | | | | 0.42 | % | | | (3,724 | ) |
| Cisco Systems, Inc. | | | 379 | | | | 0.50 | % | | | (3,847 | ) |
| Comcast Corp. — Class A | | | 363 | | | | 0.42 | % | | | (3,994 | ) |
| GCI Liberty, Inc. — Class A | | | 278 | | | | 0.53 | % | | | (4,672 | ) |
| eBay, Inc. | | | 635 | | | | 0.64 | % | | | (4,743 | ) |
| News Corp. — Class A | | | 1,776 | | | | 0.53 | % | | | (6,217 | ) |
| Booking Holdings, Inc. | | | 11 | | | | 0.49 | % | | | (6,630 | ) |
| AT&T, Inc. | | | 1,282 | | | | 1.25 | % | | | (7,512 | ) |
| AMC Networks, Inc. — Class A | | | 560 | | | | 0.45 | % | | | (8,684 | ) |
| Discovery, Inc. — Class A | | | 873 | | | | 0.57 | % | | | (8,742 | ) |
| Yelp, Inc. — Class A | | | 628 | | | | 0.38 | % | | | (10,343 | ) |
| Omnicom Group, Inc. | | | 596 | | | | 1.09 | % | | | (14,203 | ) |
| Total Communications | | | | | | | | | | | (92,056 | ) |
| Consumer, Non-cyclical | | | | | | | | | | | | |
| Eli Lilly & Co. | | | 110 | | | | 0.51 | % | | | 3,479 | |
| CVS Health Corp. | | | 366 | | | | 0.73 | % | | | 1,962 | |
| Cardinal Health, Inc. | | | 467 | | | | 0.75 | % | | | 1,478 | |
| JM Smucker Co. | | | 134 | | | | 0.50 | % | | | 999 | |
| United Therapeutics Corp. | | | 162 | | | | 0.51 | % | | | 833 | |
| McKesson Corp. | | | 303 | | | | 1.37 | % | | | 730 | |
| Amgen, Inc. | | | 190 | | | | 1.29 | % | | | 724 | |
| Baxter International, Inc. | | | 182 | | | | 0.49 | % | | | 644 | |
| General Mills, Inc. | | | 502 | | | | 0.89 | % | | | 186 | |
| Thermo Fisher Scientific, Inc. | | | 49 | | | | 0.46 | % | | | (154 | ) |
| Kellogg Co. | | | 421 | | | | 0.84 | % | | | (354 | ) |
| Becton Dickinson and Co. | | | 83 | | | | 0.64 | % | | | (602 | ) |
| STERIS plc | | | 91 | | | | 0.43 | % | | | (613 | ) |
| Kimberly-Clark Corp. | | | 136 | | | | 0.58 | % | | | (637 | ) |
| Halozyme Therapeutics, Inc. | | | 517 | | | | 0.31 | % | | | (651 | ) |
| BioMarin Pharmaceutical, Inc. | | | 142 | | | | 0.40 | % | | | (718 | ) |
| John B Sanfilippo & Son, Inc. | | | 178 | | | | 0.53 | % | | | (780 | ) |
| Ingredion, Inc. | | | 196 | | | | 0.49 | % | | | (927 | ) |
| Conagra Brands, Inc. | | | 332 | | | | 0.33 | % | | | (957 | ) |
| Mondelez International, Inc. — Class A | | | 276 | | | | 0.46 | % | | | (1,128 | ) |
| Abbott Laboratories | | | 360 | | | | 0.95 | % | | | (1,137 | ) |
| Zoetis, Inc. | | | 69 | | | | 0.27 | % | | | (1,202 | ) |
| Zimmer Biomet Holdings, Inc. | | | 62 | | | | 0.21 | % | | | (1,203 | ) |
| Philip Morris International, Inc. | | | 286 | | | | 0.70 | % | | | (1,487 | ) |
| TreeHouse Foods, Inc. | | | 366 | | | | 0.54 | % | | | (1,496 | ) |
| Innoviva, Inc. | | | 879 | | | | 0.35 | % | | | (1,526 | ) |
| Alexion Pharmaceuticals, Inc. | | | 133 | | | | 0.40 | % | | | (1,827 | ) |
| Henry Schein, Inc. | | | 136 | | | | 0.23 | % | | | (2,150 | ) |
| Archer-Daniels-Midland Co. | | | 374 | | | | 0.44 | % | | | (2,270 | ) |
| Illumina, Inc. | | | 38 | | | | 0.35 | % | | | (2,350 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
(Depreciation) | |
| PepsiCo, Inc. | | | 176 | | | | 0.71 | % | | $ | (2,391 | ) |
| Johnson & Johnson | | | 351 | | | | 1.54 | % | | | (2,472 | ) |
| Integer Holdings Corp. | | | 201 | | | | 0.42 | % | | | (2,811 | ) |
| Merck & Company, Inc. | | | 548 | | | | 1.41 | % | | | (3,359 | ) |
| Procter & Gamble Co. | | | 392 | | | | 1.44 | % | | | (3,664 | ) |
| Edwards Lifesciences Corp. | | | 85 | | | | 0.54 | % | | | (3,839 | ) |
| Jazz Pharmaceuticals plc | | | 162 | | | | 0.54 | % | | | (4,882 | ) |
| Medtronic plc | | | 373 | | | | 1.12 | % | | | (5,141 | ) |
| Herbalife Nutrition Ltd. | | | 372 | | | | 0.36 | % | | | (5,376 | ) |
| Coca-Cola Co. | | | 543 | | | | 0.80 | % | | | (5,392 | ) |
| Macquarie Infrastructure Corp. | | | 368 | | | | 0.31 | % | | | (5,652 | ) |
| Post Holdings, Inc. | | | 308 | | | | 0.85 | % | | | (6,562 | ) |
| Hologic, Inc. | | | 541 | | | | 0.63 | % | | | (7,202 | ) |
| Pfizer, Inc. | | | 1,229 | | | | 1.34 | % | | | (10,291 | ) |
| Sysco Corp. | | | 680 | | | | 1.04 | % | | | (10,497 | ) |
| Molson Coors Beverage Co. — Class B | | | 838 | | | | 1.09 | % | | | (12,334 | ) |
| Total Consumer, Non-cyclical | | | | | | | | | | | (104,999 | ) |
| Utilities | | | | | | | | | | | | |
| NiSource, Inc. | | | 269 | | | | 0.22 | % | | | (381 | ) |
| Avista Corp. | | | 154 | | | | 0.22 | % | | | (598 | ) |
| Southern Co. | | | 463 | | | | 0.84 | % | | | (1,749 | ) |
| Portland General Electric Co. | | | 307 | | | | 0.49 | % | | | (1,897 | ) |
| FirstEnergy Corp. | | | 738 | | | | 0.99 | % | | | (1,999 | ) |
| Entergy Corp. | | | 125 | | | | 0.39 | % | | | (2,949 | ) |
| OGE Energy Corp. | | | 342 | | | | 0.35 | % | | | (4,417 | ) |
| AES Corp. | | | 1,887 | | | | 0.86 | % | | | (4,625 | ) |
| ALLETE, Inc. | | | 243 | | | | 0.49 | % | | | (4,891 | ) |
| Exelon Corp. | | | 680 | | | | 0.84 | % | | | (6,239 | ) |
| PPL Corp. | | | 1,082 | | | | 0.89 | % | | | (6,404 | ) |
| National Fuel Gas Co. | | | 653 | | | | 0.81 | % | | | (9,001 | ) |
| Public Service Enterprise Group, Inc. | | | 663 | | | | 1.00 | % | | | (9,675 | ) |
| NRG Energy, Inc. | | | 1,023 | | | | 0.93 | % | | | (11,245 | ) |
| Vistra Energy Corp. | | | 1,360 | | | | 0.73 | % | | | (12,247 | ) |
| Total Utilities | | | | | | | | | | | (78,317 | ) |
| Consumer, Cyclical | | | | | | | | | | | | |
| Walmart, Inc. | | | 66 | | | | 0.25 | % | | | 375 | |
| Costco Wholesale Corp. | | | 26 | | | | 0.25 | % | | | (473 | ) |
| Walgreens Boots Alliance, Inc. | | | 167 | | | | 0.26 | % | | | (1,500 | ) |
| Lear Corp. | | | 83 | | | | 0.23 | % | | | (2,804 | ) |
| Home Depot, Inc. | | | 115 | | | | 0.72 | % | | | (3,374 | ) |
| MSC Industrial Direct Company, Inc. — Class A | | | 180 | | | | 0.33 | % | | | (3,610 | ) |
| Gentherm, Inc. | | | 448 | | | | 0.47 | % | | | (4,187 | ) |
| Lennar Corp. — Class A | | | 224 | | | | 0.29 | % | | | (4,573 | ) |
| Mohawk Industries, Inc. | | | 73 | | | | 0.19 | % | | | (4,610 | ) |
| Cummins, Inc. | | | 131 | | | | 0.59 | % | | | (4,693 | ) |
| Lowe’s Companies, Inc. | | | 134 | | | | 0.39 | % | | | (4,834 | ) |
| DR Horton, Inc. | | | 335 | | | | 0.38 | % | | | (4,835 | ) |
| VF Corp. | | | 126 | | | | 0.23 | % | | | (5,265 | ) |
| Allison Transmission Holdings, Inc. | | | 510 | | | | 0.56 | % | | | (5,861 | ) |
| PulteGroup, Inc. | | | 450 | | | | 0.34 | % | | | (6,472 | ) |
| Starbucks Corp. | | | 285 | | | | 0.63 | % | | | (6,579 | ) |
| Toll Brothers, Inc. | | | 437 | | | | 0.28 | % | | | (7,602 | ) |
| Polaris, Inc. | | | 147 | | | | 0.24 | % | | | (7,822 | ) |
| Extended Stay America, Inc. | | | 1,099 | | | | 0.27 | % | | | (7,953 | ) |
| Autoliv, Inc. | | | 299 | | | | 0.46 | % | | | (8,977 | ) |
| Brunswick Corp. | | | 396 | | | | 0.47 | % | | | (9,232 | ) |
| Whirlpool Corp. | | | 164 | | | | 0.47 | % | | | (10,778 | ) |
| Wyndham Destinations, Inc. | | | 399 | | | | 0.29 | % | | | (11,516 | ) |
| General Motors Co. | | | 783 | | | | 0.54 | % | | | (12,416 | ) |
| Carnival Corp. | | | 741 | | | | 0.33 | % | | | (21,736 | ) |
| Total Consumer, Cyclical | | | | | | | | | | | (161,327 | ) |
| Financial | | | | | | | | | | | | |
| Lexington Realty Trust | | | 2,157 | | | | 0.72 | % | | | (940 | ) |
| Visa, Inc. — Class A | | | 56 | | | | 0.30 | % | | | (1,064 | ) |
| Berkshire Hathaway, Inc. — Class B | | | 68 | | | | 0.42 | % | | | (1,513 | ) |
| Bank of America Corp. | | | 285 | | | | 0.20 | % | | | (1,958 | ) |
| Mastercard, Inc. — Class A | | | 30 | | | | 0.24 | % | | | (2,020 | ) |
| JPMorgan Chase & Co. | | | 113 | | | | 0.34 | % | | | (2,333 | ) |
| Northern Trust Corp. | | | 87 | | | | 0.22 | % | | | (2,843 | ) |
| Citigroup, Inc. | | | 78 | | | | 0.11 | % | | | (2,953 | ) |
| Wells Fargo & Co. | | | 176 | | | | 0.17 | % | | | (3,469 | ) |
| Sunstone Hotel Investors, Inc. | | | 982 | | | | 0.29 | % | | | (3,648 | ) |
| Travelers Companies, Inc. | | | 116 | | | | 0.39 | % | | | (4,318 | ) |
| Kennedy-Wilson Holdings, Inc. | | | 750 | | | | 0.34 | % | | | (6,820 | ) |
| Summit Hotel Properties, Inc. | | | 2,365 | | | | 0.33 | % | | | (10,650 | ) |
| Brixmor Property Group, Inc. | | | 1,184 | | | | 0.38 | % | | | (12,416 | ) |
| Weingarten Realty Investors | | | 1,030 | | | | 0.50 | % | | | (14,686 | ) |
| Total Financial | | | | | | | | | | | (71,631 | ) |
| Basic Materials | | | | | | | | | | | | |
| International Paper Co. | | | 262 | | | | 0.21 | % | | | (3,393 | ) |
| Domtar Corp. | | | 288 | | | | 0.21 | % | | | (3,932 | ) |
| Total Basic Materials | | | | | | | | | | | (7,325 | ) |
| Total GS Equity Long Custom Basket | | | | | | | | | | | (764, 713) | |
|
| GS EQUITY SHORT CUSTOM BASKET |
| Financial | | | | | | | | | | | | |
| Realty Income Corp. | | | 1,244 | | | | (1.44 | )% | | | 33,797 | |
| Cousins Properties, Inc. | | | 2,183 | | | | (1.48 | )% | | | 24,169 | |
| People’s United Financial, Inc. | | | 4,891 | | | | (1.26 | )% | | | 23,109 | |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| Essential Properties Realty Trust, Inc. | | | 1,540 | | | | (0.47 | )% | | $ | 20,594 | |
| WP Carey, Inc. | | | 560 | | | | (0.76 | )% | | | 18,378 | |
| Cadence BanCorp | | | 1,598 | | | | (0.24 | )% | | | 18,231 | |
| BOK Financial Corp. | | | 472 | | | | (0.47 | )% | | | 16,452 | |
| Old National Bancorp | | | 3,229 | | | | (0.99 | )% | | | 13,702 | |
| Ameris Bancorp | | | 718 | | | | (0.40 | )% | | | 13,562 | |
| First Republic Bank | | | 718 | | | | (1.37 | )% | | | 13,310 | |
| UDR, Inc. | | | 1,239 | | | | (1.05 | )% | | | 13,027 | |
| Western Alliance Bancorporation | | | 436 | | | | (0.31 | )% | | | 11,790 | |
| Atlantic Union Bankshares Corp. | | | 743 | | | | (0.38 | )% | | | 10,777 | |
| Global Net Lease, Inc. | | | 1,439 | | | | (0.45 | )% | | | 9,931 | |
| CareTrust REIT, Inc. | | | 1,667 | | | | (0.57 | )% | | | 9,054 | |
| Alexandria Real Estate Equities, Inc. | | | 520 | | | | (1.66 | )% | | | 8,890 | |
| Northwest Bancshares, Inc. | | | 1,448 | | | | (0.39 | )% | | | 7,707 | |
| First Midwest Bancorp, Inc. | | | 809 | | | | (0.25 | )% | | | 7,704 | |
| Valley National Bancorp | | | 2,413 | | | | (0.41 | )% | | | 7,561 | |
| Washington Real Estate Investment Trust | | | 1,833 | | | | (1.02 | )% | | | 6,507 | |
| CenterState Bank Corp. | | | 729 | | | | (0.29 | )% | | | 5,025 | |
| Agree Realty Corp. | | | 1,045 | | | | (1.50 | )% | | | 4,744 | |
| Glacier Bancorp, Inc. | | | 746 | | | | (0.59 | )% | | | 4,599 | |
| Arthur J Gallagher & Co. | | | 873 | | | | (1.65 | )% | | | 4,593 | |
| EastGroup Properties, Inc. | | | 457 | | | | (1.11 | )% | | | 4,587 | |
| CME Group, Inc. — Class A | | | 128 | | | | (0.51 | )% | | | 4,221 | |
| Medical Properties Trust, Inc. | | | 975 | | | | (0.39 | )% | | | 3,727 | |
| National Storage Affiliates Trust | | | 842 | | | | (0.58 | )% | | | 3,687 | |
| Healthcare Realty Trust, Inc. | | | 819 | | | | (0.53 | )% | | | 3,604 | |
| Brown & Brown, Inc. | | | 1,775 | | | | (1.49 | )% | | | 2,882 | |
| Sun Communities, Inc. | | | 535 | | | | (1.55 | )% | | | 2,493 | |
| Columbia Financial, Inc. | | | 1,808 | | | | (0.60 | )% | | | 958 | |
| American Tower Corp. — Class A | | | 117 | | | | (0.59 | )% | | | 648 | |
| Progressive Corp. | | | 359 | | | | (0.62 | )% | | | (18 | ) |
| RLI Corp. | | | 925 | | | | (1.89 | )% | | | (113 | ) |
| Crown Castle International Corp. | | | 396 | | | | (1.33 | )% | | | (2,862 | ) |
| Rexford Industrial Realty, Inc. | | | 2,531 | | | | (2.41 | )% | | | (3,450 | ) |
| QTS Realty Trust, Inc. — Class A | | | 1,090 | | | | (1.47 | )% | | | (6,313 | ) |
| Equinix, Inc. | | | 71 | | | | (1.03 | )% | | | (8,543 | ) |
| Terreno Realty Corp. | | | 1,836 | | | | (2.21 | )% | | | (8,568 | ) |
| Easterly Government Properties, Inc. | | | 4,932 | | | | (2.82 | )% | | | (13,446 | ) |
| SBA Communications Corp. | | | 344 | | | | (2.16 | )% | | | (15,121 | ) |
| Total Financial | | | | | | | | | | | 275,586 | |
| Utilities | | | | | | | | | | | | |
| Sempra Energy | | | 117 | | | | (0.31 | )% | | | 3,904 | |
| Eversource Energy | | | 407 | | | | (0.74 | )% | | | 3,790 | |
| Dominion Energy, Inc. | | | 551 | | | | (0.92 | )% | | | 3,708 | |
| WEC Energy Group, Inc. | | | 502 | | | | (1.03 | )% | | | 3,547 | |
| MGE Energy, Inc. | | | 343 | | | | (0.52 | )% | | | 3,410 | |
| American States Water Co. | | | 639 | | | | (1.21 | )% | | | 2,947 | |
| American Water Works Company, Inc. | | | 547 | | | | (1.52 | )% | | | 2,928 | |
| Alliant Energy Corp. | | | 325 | | | | (0.36 | )% | | | 1,503 | |
| California Water Service Group | | | 884 | | | | (1.03 | )% | | | 1,359 | |
| Atmos Energy Corp. | | | 238 | | | | (0.55 | )% | | | 861 | |
| NextEra Energy, Inc. | | | 146 | | | | (0.82 | )% | | | (470 | ) |
| Total Utilities | | | | | | | | | | | 27,487 | |
| Technology | | | | | | | | | | | | |
| Autodesk, Inc. | | | 222 | | | | (0.81 | )% | | | 7,390 | |
| Twilio, Inc. — Class A | | | 320 | | | | (0.67 | )% | | | 6,285 | |
| Broadcom, Inc. | | | 111 | | | | (0.61 | )% | | | 5,745 | |
| Elastic N.V. | | | 309 | | | | (0.40 | )% | | | 5,739 | |
| Workday, Inc. — Class A | | | 74 | | | | (0.22 | )% | | | 5,682 | |
| HubSpot, Inc. | | | 172 | | | | (0.53 | )% | | | 4,189 | |
| Alteryx, Inc. — Class A | | | 232 | | | | (0.51 | )% | | | 3,048 | |
| CACI International, Inc. — Class A | | | 210 | | | | (1.03 | )% | | | 2,748 | |
| Leidos Holdings, Inc. | | | 263 | | | | (0.56 | )% | | | 2,514 | |
| Workiva, Inc. | | | 515 | | | | (0.39 | )% | | | 2,445 | |
| ServiceNow, Inc. | | | 101 | | | | (0.67 | )% | | | 2,208 | |
| salesforce.com, Inc. | | | 392 | | | | (1.31 | )% | | | 1,995 | |
| MongoDB, Inc. | | | 129 | | | | (0.41 | )% | | | 1,887 | |
| Coupa Software, Inc. | | | 123 | | | | (0.40 | )% | | | 1,723 | |
| Paycom Software, Inc. | | | 47 | | | | (0.22 | )% | | | 1,544 | |
| Fair Isaac Corp. | | | 34 | | | | (0.24 | )% | | | 1,460 | |
| EPAM Systems, Inc. | | | 238 | | | | (1.03 | )% | | | 1,314 | |
| Black Knight, Inc. | | | 742 | | | | (1.00 | )% | | | 846 | |
| Veeva Systems, Inc. — Class A | | | 75 | | | | (0.27 | )% | | | 813 | |
| Smartsheet, Inc. — Class A | | | 478 | | | | (0.46 | )% | | | 364 | |
| Tyler Technologies, Inc. | | | 61 | | | | (0.42 | )% | | | (566 | ) |
| Appfolio, Inc. — Class A | | | 92 | | | | (0.24 | )% | | | (998 | ) |
| ANSYS, Inc. | | | 52 | | | | (0.28 | )% | | | (1,052 | ) |
| Splunk, Inc. | | | 225 | | | | (0.66 | )% | | | (1,667 | ) |
| Monolithic Power Systems, Inc. | | | 75 | | | | (0.29 | )% | | | (2,722 | ) |
| Five9, Inc. | | | 253 | | | | (0.45 | )% | | | (4,747 | ) |
| RingCentral, Inc. — Class A | | | 73 | | | | (0.36 | )% | | | (6,146 | ) |
| Total Technology | | | | | | | | | | | 42,041 | |
| Consumer, Non-cyclical | | | | | | | | | | | | |
| Equifax, Inc. | | | 634 | | | | (1.76 | )% | | | 18,044 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| Gartner, Inc. | | | 189 | | | | (0.44 | )% | | $ | 11,084 | |
| Verisk Analytics, Inc. — Class A | | | 264 | | | | (0.85 | )% | | | 3,476 | |
| CoStar Group, Inc. | | | 80 | | | | (1.09 | )% | | | 3,416 | |
| PayPal Holdings, Inc. | | | 500 | | | | (1.11 | )% | | | 3,338 | |
| MarketAxess Holdings, Inc. | | | 73 | | | | (0.56 | )% | | | 206 | |
| Avalara, Inc. | | | 466 | | | | (0.81 | )% | | | (19 | ) |
| ResMed, Inc. | | | 73 | | | | (0.25 | )% | | | (905 | ) |
| Rollins, Inc. | | | 1,749 | | | | (1.47 | )% | | | (1,198 | ) |
| Total Consumer, Non-cyclical | | | | | | | | | | | 37,442 | |
| Industrial | | | | | | | | | | | | |
| TransDigm Group, Inc. | | | 252 | | | | (1.87 | )% | | | 33,762 | |
| Waste Management, Inc. | | | 780 | | | | (1.68 | )% | | | 18,492 | |
| Materion Corp. | | | 480 | | | | (0.39 | )% | | | 14,486 | |
| HEICO Corp. | | | 218 | | | | (0.38 | )% | | | 12,304 | |
| Tetra Tech, Inc. | | | 585 | | | | (0.96 | )% | | | 9,792 | |
| Roper Technologies, Inc. | | | 108 | | | | (0.78 | )% | | | 6,585 | |
| Casella Waste Systems, Inc. — Class A | | | 1,010 | | | | (0.92 | )% | | | 6,349 | |
| Sonoco Products Co. | | | 600 | | | | (0.65 | )% | | | 5,707 | |
| Republic Services, Inc. — Class A | | | 311 | | | | (0.54 | )% | | | 4,936 | |
| Ball Corp. | | | 942 | | | | (1.42 | )% | | | 4,215 | |
| Exponent, Inc. | | | 797 | | | | (1.33 | )% | | | 226 | |
| Total Industrial | | | | | | | | | | | 116,854 | |
| Basic Materials | | | | | | | | | | | | |
| Compass Minerals International, Inc. | | | 760 | | | | (0.68 | )% | | | 13,899 | |
| Kaiser Aluminum Corp. | | | 505 | | | | (0.81 | )% | | | 13,507 | |
| PPG Industries, Inc. | | | 421 | | | | (0.82 | )% | | | 12,863 | |
| Linde plc | | | 305 | | | | (1.23 | )% | | | 9,398 | |
| Southern Copper Corp. | | | 520 | | | | (0.34 | )% | | | 7,319 | |
| RPM International, Inc. | | | 1,068 | | | | (1.48 | )% | | | 6,059 | |
| Sherwin-Williams Co. | | | 83 | | | | (0.89 | )% | | | 6,000 | |
| Balchem Corp. | | | 833 | | | | (1.91 | )% | | | (2,090 | ) |
| Newmont Corp. | | | 1,983 | | | | (2.09 | )% | | | (2,484 | ) |
| Total Basic Materials | | | | | | | | | | | 64,471 | |
| Consumer, Cyclical | | | | | | | | | | | | |
| Copart, Inc. | | | 1,070 | | | | (1.70 | )% | | | 28,498 | |
| Communications | | | | | | | | | | | | |
| 8x8, Inc. | | | 1,760 | | | | (0.57 | )% | | | 11,373 | |
| Q2 Holdings, Inc. | | | 488 | | | | (0.67 | )% | | | 8,286 | |
| Proofpoint, Inc. | | | 309 | | | | (0.74 | )% | | | 3,467 | |
| Trade Desk, Inc. — Class A | | | 38 | | | | (0.17 | )% | | | 1,718 | |
| Okta, Inc. | | | 180 | | | | (0.50 | )% | | | 852 | |
| Total Communications | | | | | | | | | | | 25,696 | |
| Total GS Equity Short Custom Basket | | | | | | | | | | | 618,075 | |
| | | | | | | | | | | | | |
| MS EQUITY LONG CUSTOM BASKET |
| Technology | | | | | | | | | | | | |
| Microsoft Corp. | | | 230 | | | | 1.21 | % | | | 9,338 | |
| Apple, Inc. | | | 138 | | | | 1.17 | % | | | 4,847 | |
| Activision Blizzard, Inc. | | | 437 | | | | 0.86 | % | | | 1,877 | |
| NVIDIA Corp. | | | 32 | | | | 0.28 | % | | | 667 | |
| Intel Corp. | | | 158 | | | | 0.28 | % | | | 152 | |
| Micron Technology, Inc. | | | 108 | | | | 0.15 | % | | | (450 | ) |
| Adobe, Inc. | | | 22 | | | | 0.23 | % | | | (469 | ) |
| QUALCOMM, Inc. | | | 87 | | | | 0.20 | % | | | (632 | ) |
| Oracle Corp. | | | 294 | | | | 0.47 | % | | | (1,357 | ) |
| Teradata Corp. | | | 350 | | | | 0.24 | % | | | (3,088 | ) |
| Total Technology | | | | | | | | | | | 10,885 | |
| Industrial | | | | | | | | | | | | |
| Old Dominion Freight Line, Inc. | | | 81 | | | | 0.35 | % | | | 2,879 | |
| Marten Transport Ltd. | | | 611 | | | | 0.42 | % | | | 1,888 | |
| Werner Enterprises, Inc. | | | 711 | | | | 0.86 | % | | | 1,704 | |
| Knight-Swift Transportation Holdings, Inc. | | | 234 | | | | 0.25 | % | | | 332 | |
| Heartland Express, Inc. | | | 683 | | | | 0.42 | % | | | (464 | ) |
| Schneider National, Inc. — Class B | | | 419 | | | | 0.27 | % | | | (670 | ) |
| Mettler-Toledo International, Inc. | | | 29 | | | | 0.67 | % | | | (977 | ) |
| Garmin Ltd. | | | 146 | | | | 0.36 | % | | | (1,184 | ) |
| Oshkosh Corp. | | | 145 | | | | 0.31 | % | | | (1,233 | ) |
| Vishay Intertechnology, Inc. | | | 461 | | | | 0.22 | % | | | (1,710 | ) |
| Union Pacific Corp. | | | 126 | | | | 0.59 | % | | | (1,724 | ) |
| Westrock Co. | | | 595 | | | | 0.56 | % | | | (1,791 | ) |
| Regal Beloit Corp. | | | 283 | | | | 0.59 | % | | | (1,988 | ) |
| Landstar System, Inc. | | | 245 | | | | 0.78 | % | | | (2,208 | ) |
| General Dynamics Corp. | | | 51 | | | | 0.22 | % | | | (2,544 | ) |
| Caterpillar, Inc. | | | 233 | | | | 0.90 | % | | | (2,619 | ) |
| Echo Global Logistics, Inc. | | | 720 | | | | 0.41 | % | | | (2,788 | ) |
| General Electric Co. | | | 785 | | | | 0.21 | % | | | (3,089 | ) |
| J.B. Hunt Transport Services, Inc. | | | 148 | | | | 0.45 | % | | | (3,538 | ) |
| Gentex Corp. | | | 890 | | | | 0.66 | % | | | (3,891 | ) |
| Lincoln Electric Holdings, Inc. | | | 339 | | | | 0.78 | % | | | (4,631 | ) |
| Illinois Tool Works, Inc. | | | 132 | | | | 0.62 | % | | | (4,920 | ) |
| Waters Corp. | | | 100 | | | | 0.60 | % | | | (5,231 | ) |
| Norfolk Southern Corp. | | | 174 | | | | 0.84 | % | | | (5,269 | ) |
| AGCO Corp. | | | 184 | | | | 0.29 | % | | | (5,271 | ) |
| Albany International Corp. — Class A | | | 191 | | | | 0.30 | % | | | (5,605 | ) |
| CSX Corp. | | | 389 | | | | 0.74 | % | | | (5,718 | ) |
| Masco Corp. | | | 448 | | | | 0.51 | % | | | (5,761 | ) |
| Eaton Corporation plc | | | 331 | | | | 0.85 | % | | | (5,830 | ) |
| MasTec, Inc. | | | 197 | | | | 0.21 | % | | | (5,866 | ) |
| Rockwell Automation, Inc. | | | 108 | | | | 0.54 | % | | | (6,074 | ) |
| CH Robinson Worldwide, Inc. | | | 444 | | | | 0.98 | % | | | (6,154 | ) |
| Arconic, Inc. | | | 495 | | | | 0.26 | % | | | (6,816 | ) |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| FedEx Corp. | | | 206 | | | | 0.83 | % | | $ | (7,328 | ) |
| Terex Corp. | | | 512 | | | | 0.24 | % | | | (7,409 | ) |
| Honeywell International, Inc. | | | 235 | | | | 1.04 | % | | | (8,273 | ) |
| Textron, Inc. | | | 469 | | | | 0.42 | % | | | (9,292 | ) |
| Kennametal, Inc. | | | 605 | | | | 0.37 | % | | | (9,660 | ) |
| Emerson Electric Co. | | | 399 | | | | 0.63 | % | | | (9,834 | ) |
| Crane Co. | | | 648 | | | | 1.06 | % | | | (15,636 | ) |
| Total Industrial | | | | | | | | | | | (166,193 | ) |
| Consumer, Cyclical | | | | | | | | | | | | |
| Walmart, Inc. | | | 66 | | | | 0.25 | % | | | 1,083 | |
| Costco Wholesale Corp. | | | 26 | | | | 0.25 | % | | | (457 | ) |
| Walgreens Boots Alliance, Inc. | | | 167 | | | | 0.25 | % | | | (1,508 | ) |
| Lear Corp. | | | 83 | | | | 0.22 | % | | | (2,765 | ) |
| Home Depot, Inc. | | | 115 | | | | 0.71 | % | | | (3,003 | ) |
| MSC Industrial Direct Company, Inc. — Class A | | | 180 | | | | 0.33 | % | | | (3,582 | ) |
| Cummins, Inc. | | | 131 | | | | 0.59 | % | | | (4,093 | ) |
| Gentherm, Inc. | | | 448 | | | | 0.47 | % | | | (4,163 | ) |
| Lennar Corp. — Class A | | | 224 | | | | 0.28 | % | | | (4,524 | ) |
| Mohawk Industries, Inc. | | | 73 | | | | 0.18 | % | | | (4,639 | ) |
| DR Horton, Inc. | | | 335 | | | | 0.38 | % | | | (4,759 | ) |
| Lowe’s Companies, Inc. | | | 134 | | | | 0.38 | % | | | (4,855 | ) |
| VF Corp. | | | 126 | | | | 0.23 | % | | | (5,248 | ) |
| Allison Transmission Holdings, Inc. | | | 510 | | | | 0.55 | % | | | (6,432 | ) |
| PulteGroup, Inc. | | | 450 | | | | 0.33 | % | | | (6,466 | ) |
| Starbucks Corp. | | | 285 | | | | 0.62 | % | | | (6,560 | ) |
| Toll Brothers, Inc. | | | 437 | | | | 0.28 | % | | | (7,266 | ) |
| Polaris, Inc. | | | 147 | | | | 0.24 | % | | | (7,834 | ) |
| Extended Stay America, Inc. | | | 1,099 | | | | 0.27 | % | | | (7,955 | ) |
| Autoliv, Inc. | | | 299 | | | | 0.46 | % | | | (8,853 | ) |
| Brunswick Corp. | | | 396 | | | | 0.47 | % | | | (9,293 | ) |
| Whirlpool Corp. | | | 164 | | | | 0.47 | % | | | (10,717 | ) |
| Wyndham Destinations, Inc. | | | 399 | | | | 0.29 | % | | | (11,519 | ) |
| General Motors Co. | | | 783 | | | | 0.54 | % | | | (12,430 | ) |
| Carnival Corp. | | | 741 | | | | 0.32 | % | | | (21,702 | ) |
| Total Consumer, Cyclical | | | | | | | | | | | (159,540 | ) |
| Communications | | | | | | | | | | | | |
| Amazon.com, Inc. | | | 14 | | | | 0.91 | % | | | 2,990 | |
| Alphabet, Inc. — Class C | | | 49 | | | | 1.89 | % | | | (1,011 | ) |
| Facebook, Inc. — Class A | | | 180 | | | | 1.00 | % | | | (1,111 | ) |
| Charter Communications, Inc. — Class A | | | 36 | | | | 0.52 | % | | | (2,576 | ) |
| Walt Disney Co. | | | 64 | | | | 0.21 | % | | | (3,198 | ) |
| Cisco Systems, Inc. | | | 379 | | | | 0.49 | % | | | (3,491 | ) |
| Altice USA, Inc. — Class A | | | 569 | | | | 0.42 | % | | | (3,758 | ) |
| Scholastic Corp. | | | 276 | | | | 0.23 | % | | | (3,795 | ) |
| Comcast Corp. — Class A | | | 363 | | | | 0.41 | % | | | (3,974 | ) |
| GCI Liberty, Inc. — Class A | | | 278 | | | | 0.53 | % | | | (4,665 | ) |
| eBay, Inc. | | | 636 | | | | 0.64 | % | | | (4,673 | ) |
| Verizon Communications, Inc. | | | 824 | | | | 1.47 | % | | | (5,560 | ) |
| News Corp. — Class A | | | 1,776 | | | | 0.53 | % | | | (6,635 | ) |
| Booking Holdings, Inc. | | | 11 | | | | 0.49 | % | | | (6,675 | ) |
| AT&T, Inc. | | | 1,282 | | | | 1.24 | % | | | (7,062 | ) |
| Discovery, Inc. — Class A | | | 873 | | | | 0.56 | % | | | (8,081 | ) |
| AMC Networks, Inc. — Class A | | | 560 | | | | 0.45 | % | | | (8,662 | ) |
| Yelp, Inc. — Class A | | | 628 | | | | 0.38 | % | | | (10,427 | ) |
| Omnicom Group, Inc. | | | 596 | | | | 1.09 | % | | | (13,321 | ) |
| Total Communications | | | | | | | | | | | (95,685 | ) |
| Consumer, Non-cyclical | | | | | | | | | | | | |
| McKesson Corp. | | | 303 | | | | 1.36 | % | | | 5,461 | |
| Eli Lilly & Co. | | | 110 | | | | 0.51 | % | | | 3,536 | |
| CVS Health Corp. | | | 366 | | | | 0.72 | % | | | 2,291 | |
| JM Smucker Co. | | | 134 | | | | 0.49 | % | | | 984 | |
| Cardinal Health, Inc. | | | 467 | | | | 0.74 | % | | | 969 | |
| United Therapeutics Corp. | | | 162 | | | | 0.51 | % | | | 960 | |
| Kimberly-Clark Corp. | | | 135 | | | | 0.57 | % | | | 610 | |
| General Mills, Inc. | | | 502 | | | | 0.88 | % | | | 566 | |
| Thermo Fisher Scientific, Inc. | | | 49 | | | | 0.46 | % | | | 435 | |
| Baxter International, Inc. | | | 182 | | | | 0.49 | % | | | 382 | |
| Amgen, Inc. | | | 190 | | | | 1.28 | % | | | (24 | ) |
| Kellogg Co. | | | 421 | | | | 0.84 | % | | | (271 | ) |
| STERIS plc | | | 91 | | | | 0.42 | % | | | (590 | ) |
| Halozyme Therapeutics, Inc. | | | 517 | | | | 0.31 | % | | | (655 | ) |
| BioMarin Pharmaceutical, Inc. | | | 142 | | | | 0.40 | % | | | (747 | ) |
| John B Sanfilippo & Son, Inc. | | | 178 | | | | 0.53 | % | | | (799 | ) |
| Mondelez International, Inc. — Class A | | | 276 | | | | 0.46 | % | | | (813 | ) |
| Abbott Laboratories | | | 360 | | | | 0.94 | % | | | (872 | ) |
| PepsiCo, Inc. | | | 176 | | | | 0.70 | % | | | (985 | ) |
| Conagra Brands, Inc. | | | 332 | | | | 0.32 | % | | | (1,001 | ) |
| Zoetis, Inc. | | | 69 | | | | 0.27 | % | | | (1,211 | ) |
| Becton Dickinson and Co. | | | 83 | | | | 0.63 | % | | | (1,314 | ) |
| Innoviva, Inc. | | | 879 | | | | 0.34 | % | | | (1,340 | ) |
| TreeHouse Foods, Inc. | | | 366 | | | | 0.54 | % | | | (1,477 | ) |
| Zimmer Biomet Holdings, Inc. | | | 62 | | | | 0.21 | % | | | (1,600 | ) |
| Alexion Pharmaceuticals, Inc. | | | 133 | | | | 0.40 | % | | | (1,796 | ) |
| Integer Holdings Corp. | | | 201 | | | | 0.42 | % | | | (2,092 | ) |
| Henry Schein, Inc. | | | 136 | | | | 0.23 | % | | | (2,194 | ) |
| Johnson & Johnson | | | 351 | | | | 1.53 | % | | | (2,227 | ) |
| Illumina, Inc. | | | 38 | | | | 0.34 | % | | | (2,328 | ) |
| Archer-Daniels-Midland Co. | | | 374 | | | | 0.44 | % | | | (2,765 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Depreciation | |
| Merck & Company, Inc. | | | 548 | | | | 1.40 | % | | $ | (3,003 | ) |
| Ingredion, Inc. | | | 196 | | | | 0.49 | % | | | (3,111 | ) |
| Procter & Gamble Co. | | | 392 | | | | 1.43 | % | | | (3,141 | ) |
| Medtronic plc | | | 373 | | | | 1.12 | % | | | (3,479 | ) |
| Edwards Lifesciences Corp. | | | 85 | | | | 0.53 | % | | | (3,853 | ) |
| Philip Morris International, Inc. | | | 286 | | | | 0.69 | % | | | (3,982 | ) |
| Coca-Cola Co. | | | 543 | | | | 0.80 | % | | | (5,293 | ) |
| Macquarie Infrastructure Corp. | | | 368 | | | | 0.31 | % | | | (5,572 | ) |
| Jazz Pharmaceuticals plc | | | 162 | | | | 0.54 | % | | | (5,749 | ) |
| Hologic, Inc. | | | 541 | | | | 0.63 | % | | | (6,013 | ) |
| Post Holdings, Inc. | | | 308 | | | | 0.85 | % | | | (6,995 | ) |
| Sysco Corp. | | | 680 | | | | 1.03 | % | | | (8,201 | ) |
| Pfizer, Inc. | | | 1,229 | | | | 1.33 | % | | | (8,583 | ) |
| Herbalife Nutrition Ltd. | | | 973 | | | | 0.94 | % | | | (10,057 | ) |
| Molson Coors Beverage Co. — Class B | | | 839 | | | | 1.09 | % | | | (12,531 | ) |
| Total Consumer, Non-cyclical | | | | | | | | | | | (100,470 | ) |
| Utilities | | | | | | | | | | | | |
| NiSource, Inc. | | | 269 | | | | 0.22 | % | | | (404 | ) |
| Avista Corp. | | | 154 | | | | 0.22 | % | | | (497 | ) |
| FirstEnergy Corp. | | | 738 | | | | 1.06 | % | | | (1,241 | ) |
| Portland General Electric Co. | | | 307 | | | | 0.49 | % | | | (1,274 | ) |
| Southern Co. | | | 464 | | | | 0.83 | % | | | (1,608 | ) |
| Entergy Corp. | | | 125 | | | | 0.39 | % | | | (2,965 | ) |
| OGE Energy Corp. | | | 342 | | | | 0.35 | % | | | (4,427 | ) |
| ALLETE, Inc. | | | 243 | | | | 0.49 | % | �� | | (4,879 | ) |
| AES Corp. | | | 1,887 | | | | 0.85 | % | | | (6,197 | ) |
| Exelon Corp. | | | 680 | | | | 0.83 | % | | | (6,527 | ) |
| PPL Corp. | | | 1,082 | | | | 0.89 | % | | | (8,119 | ) |
| Public Service Enterprise Group, Inc. | | | 663 | | | | 0.99 | % | | | (9,444 | ) |
| NRG Energy, Inc. | | | 1,023 | | | | 0.93 | % | | | (11,058 | ) |
| National Fuel Gas Co. | | | 653 | | | | 0.81 | % | | | (12,966 | ) |
| Vistra Energy Corp. | | | 1,360 | | | | 0.72 | % | | | (13,786 | ) |
| Total Utilities | | | | | | | | | | | (85,392 | ) |
| Financial | | | | | | | | | | | | |
| Lexington Realty Trust | | | 2,157 | | | | 0.71 | % | | | (890 | ) |
| Visa, Inc. — Class A | | | 56 | | | | 0.30 | % | | | (1,075 | ) |
| JPMorgan Chase & Co. | | | 113 | | | | 0.34 | % | | | (1,079 | ) |
| Berkshire Hathaway, Inc. — Class B | | | 68 | | | | 0.41 | % | | | (1,331 | ) |
| Bank of America Corp. | | | 285 | | | | 0.20 | % | | | (1,989 | ) |
| Mastercard, Inc. — Class A | | | 30 | | | | 0.24 | % | | | (2,024 | ) |
| Northern Trust Corp. | | | 87 | | | | 0.22 | % | | | (2,834 | ) |
| Citigroup, Inc. | | | 78 | | | | 0.11 | % | | | (2,962 | ) |
| Sunstone Hotel Investors, Inc. | | | 983 | | | | 0.28 | % | | | (3,006 | ) |
| Wells Fargo & Co. | | | 176 | | | | 0.17 | % | | | (3,414 | ) |
| Travelers Companies, Inc. | | | 117 | | | | 0.39 | % | | | (4,359 | ) |
| | | | | | | | | | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| Kennedy-Wilson Holdings, Inc. | | | 750 | | | | 0.33 | % | | $ | (6,828 | ) |
| Summit Hotel Properties, Inc. | | | 2,364 | | | | 0.33 | % | | | (10,291 | ) |
| Brixmor Property Group, Inc. | | | 1,184 | | | | 0.37 | % | | | (12,365 | ) |
| Weingarten Realty Investors | | | 1,030 | | | | 0.49 | % | | | (14,684 | ) |
| Total Financial | | | | | | | | | | | (69,131 | ) |
| Energy | | | | | | | | | | | | |
| ConocoPhillips | | | 183 | | | | 0.19 | % | | | (4,030 | ) |
| Phillips 66 | | | 112 | | | | 0.20 | % | | | (4,885 | ) |
| Kinder Morgan, Inc. | | | 869 | | | | 0.40 | % | | | (5,266 | ) |
| Valero Energy Corp. | | | 215 | | | | 0.32 | % | | | (8,742 | ) |
| Devon Energy Corp. | | | 626 | | | | 0.14 | % | | | (9,417 | ) |
| HollyFrontier Corp. | | | 363 | | | | 0.30 | % | | | (9,442 | ) |
| Delek US Holdings, Inc. | | | 457 | | | | 0.24 | % | | | (9,543 | ) |
| CVR Energy, Inc. | | | 386 | | | | 0.21 | % | | | (11,330 | ) |
| Chevron Corp. | | | 290 | | | | 0.70 | % | | | (14,447 | ) |
| Exxon Mobil Corp. | | | 699 | | | | 0.88 | % | | | (26,586 | ) |
| Total Energy | | | | | | | | | | | (103,688 | ) |
| Basic Materials | | | | | | | | | | | | |
| International Paper Co. | | | 262 | | | | 0.27 | % | | | (3,399 | ) |
| Domtar Corp. | | | 288 | | | | 0.21 | % | | | (3,932 | ) |
| Total Basic Materials | | | | | | | | | | | (7,331 | ) |
| Total MS Equity Long Custom Basket | | | | | | | | | | | (776,545 | ) |
|
| MS EQUITY SHORT CUSTOM BASKET |
| Financial | | | | | | | | | | | | |
| Realty Income Corp. | | | 1,244 | | | | (1.36 | )% | | | 31,641 | |
| Cousins Properties, Inc. | | | 2,183 | | | | (1.40 | )% | | | 24,208 | |
| People’s United Financial, Inc. | | | 4,891 | | | | (1.18 | )% | | | 23,171 | |
| Essential Properties Realty Trust, Inc. | | | 1,540 | | | | (0.44 | )% | | | 20,645 | |
| WP Carey, Inc. | | | 561 | | | | (0.71 | )% | | �� | 18,695 | |
| Cadence BanCorp | | | 1,598 | | | | (0.23 | )% | | | 18,244 | |
| BOK Financial Corp. | | | 472 | | | | (0.44 | )% | | | 17,661 | |
| First Republic Bank | | | 718 | | | | (1.29 | )% | | | 14,445 | |
| Ameris Bancorp | | | 718 | | | | (0.37 | )% | | | 13,521 | |
| Old National Bancorp | | | 3,229 | | | | (0.93 | )% | | | 13,278 | |
| UDR, Inc. | | | 1,239 | | | | (0.99 | )% | | | 12,714 | |
| Western Alliance Bancorporation | | | 436 | | | | (0.29 | )% | | | 11,793 | |
| Atlantic Union Bankshares Corp. | | | 743 | | | | (0.36 | )% | | | 10,536 | |
| Global Net Lease, Inc. | | | 1,439 | | | | (0.42 | )% | | | 9,945 | |
| CareTrust REIT, Inc. | | | 1,667 | | | | (0.54 | )% | | | 9,125 | |
| Agree Realty Corp. | | | 1,051 | | | | (1.42 | )% | | | 8,482 | |
| Alexandria Real Estate Equities, Inc. | | | 520 | | | | (1.56 | )% | | | 8,379 | |
| Northwest Bancshares, Inc. | | | 1,448 | | | | (0.37 | )% | | | 7,734 | |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| First Midwest Bancorp, Inc. | | | 809 | | | | (0.23 | )% | | $ | 7,702 | |
| Americold Realty Trust | | | 5,101 | | | | (3.80 | )% | | | 6,575 | |
| Washington Real Estate Investment Trust | | | 1,833 | | | | (0.96 | )% | | | 6,443 | |
| Valley National Bancorp | | | 2,413 | | | | (0.39 | )% | | | 5,824 | |
| CenterState Bank Corp. | | | 729 | | | | (0.27 | )% | | | 5,025 | |
| Arthur J Gallagher & Co. | | | 873 | | | | (1.56 | )% | | | 4,365 | |
| CME Group, Inc. — Class A | | | 128 | | | | (0.48 | )% | | | 4,184 | |
| Glacier Bancorp, Inc. | | | 746 | | | | (0.56 | )% | | | 4,069 | |
| Medical Properties Trust, Inc. | | | 975 | | | | (0.37 | )% | | | 3,749 | |
| Healthcare Realty Trust, Inc. | | | 819 | | | | (0.50 | )% | | | 3,677 | |
| National Storage Affiliates Trust | | | 842 | | | | (0.55 | )% | | | 3,396 | |
| EastGroup Properties, Inc. | | | 457 | | | | (1.05 | )% | | | 3,333 | |
| Brown & Brown, Inc. | | | 1,775 | | | | (1.41 | )% | | | 2,885 | |
| Columbia Financial, Inc. | | | 1,808 | | | | (0.57 | )% | | | 2,043 | |
| American Tower Corp. — Class A | | | 117 | | | | (0.56 | )% | | | 625 | |
| Progressive Corp. | | | 359 | | | | (0.58 | )% | | | (56 | ) |
| Sun Communities, Inc. | | | 535 | | | | (1.46 | )% | | | (2,850 | ) |
| Crown Castle International Corp. | | | 396 | | | | (1.25 | )% | | | (5,608 | ) |
| QTS Realty Trust, Inc. — Class A | | | 1,090 | | | | (1.38 | )% | | | (6,281 | ) |
| Equinix, Inc. | | | 71 | | | | (0.97 | )% | | | (12,531 | ) |
| Rexford Industrial Realty, Inc. | | | 2,531 | | | | (2.27 | )% | | | (12,814 | ) |
| RLI Corp. | | | 925 | | | | (1.78 | )% | | | (12,815 | ) |
| Easterly Government Properties, Inc. | | | 4,932 | | | | (2.66 | )% | | | (13,269 | ) |
| Terreno Realty Corp. | | | 1,836 | | | | (2.08 | )% | | | (18,052 | ) |
| SBA Communications Corp. | | | 344 | | | | (2.03 | )% | | | (20,056 | ) |
| Total Financial | | | | | | | | | | | 233,780 | |
| Technology | | | | | | | | | | | | |
| Autodesk, Inc. | | | 222 | | | | (0.76 | )% | | | 7,385 | |
| Twilio, Inc. — Class A | | | 320 | | | | (0.63 | )% | | | 6,156 | |
| Workday, Inc. — Class A | | | 74 | | | | (0.21 | )% | | | 5,577 | |
| Broadcom, Inc. | | | 111 | | | | (0.58 | )% | | | 5,576 | |
| HubSpot, Inc. | | | 172 | | | | (0.50 | )% | | | 3,619 | |
| Elastic N.V. | | | 308 | | | | (0.38 | )% | | | 3,042 | |
| CACI International, Inc. — Class A | | | 210 | | | | (0.97 | )% | | | 2,643 | |
| Leidos Holdings, Inc. | | | 263 | | | | (0.53 | )% | | | 2,521 | |
| Workiva, Inc. | | | 515 | | | | (0.36 | )% | | | 2,503 | |
| ServiceNow, Inc. | | | 101 | | | | (0.63 | )% | | | 2,152 | |
| Alteryx, Inc. — Class A | | | 232 | | | | (0.48 | )% | | | 2,135 | |
| salesforce.com, Inc. | | | 392 | | | | (1.24 | )% | | | 1,475 | |
| Fair Isaac Corp. | | | 34 | | | | (0.23 | )% | | | 1,452 | |
| MongoDB, Inc. | | | 129 | | | | (0.39 | )% | | | 1,420 | |
| EPAM Systems, Inc. | | | 238 | | | | (0.97 | )% | | | 1,237 | |
| Coupa Software, Inc. | | | 123 | | | | (0.38 | )% | | | 1,127 | |
| Paycom Software, Inc. | | | 47 | | | | (0.21 | )% | | | 754 | |
| Black Knight, Inc. | | | 742 | | | | (0.94 | )% | | | 730 | |
| Smartsheet, Inc. — Class A | | | 478 | | | | (0.43 | )% | | | 330 | |
| Veeva Systems, Inc. — Class A | | | 75 | | | | (0.26 | )% | | | (110 | ) |
| Tyler Technologies, Inc. | | | 61 | | | | (0.40 | )% | | | (571 | ) |
| ANSYS, Inc. | | | 52 | | | | (0.26 | )% | | | (708 | ) |
| Appfolio, Inc. — Class A | | | 92 | | | | (0.22 | )% | | | (962 | ) |
| Splunk, Inc. | | | 225 | | | | (0.62 | )% | | | (2,032 | ) |
| Monolithic Power Systems, Inc. | | | 75 | | | | (0.27 | )% | | | (2,404 | ) |
| Five9, Inc. | | | 253 | | | | (0.42 | )% | | | (4,904 | ) |
| RingCentral, Inc. — Class A | | | 73 | | | | (0.34 | )% | | | (6,407 | ) |
| Total Technology | | | | | | | | | | | 33,736 | |
| Consumer, Non-cyclical | | | | | | | | | | | | |
| Equifax, Inc. | | | 634 | | | | (1.66 | )% | | | 18,035 | |
| Gartner, Inc. | | | 189 | | | | (0.41 | )% | | | 11,098 | |
| CoStar Group, Inc. | | | 80 | | | | (1.03 | )% | | | 3,492 | |
| Verisk Analytics, Inc. — Class A | | | 264 | | | | (0.81 | )% | | | 3,462 | |
| PayPal Holdings, Inc. | | | 500 | | | | (1.05 | )% | | | 3,134 | |
| ResMed, Inc. | | | 73 | | | | (0.24 | )% | | | (929 | ) |
| Rollins, Inc. | | | 1,750 | | | | (1.38 | )% | | | (1,229 | ) |
| MarketAxess Holdings, Inc. | | | 73 | | | | (0.53 | )% | | | (1,509 | ) |
| Avalara, Inc. | | | 466 | | | | (0.76 | )% | | | (1,599 | ) |
| Total Consumer, Non-cyclical | | | | | | | | | | | 33,955 | |
| Utilities | | | | | | | | | | | | |
| Dominion Energy, Inc. | | | 1,795 | | | | (2.84 | )% | | | 11,618 | |
| Sempra Energy | | | 117 | | | | (0.29 | )% | | | 3,963 | |
| Eversource Energy | | | 407 | | | | (0.70 | )% | | | 3,725 | |
| WEC Energy Group, Inc. | | | 502 | | | | (0.97 | )% | | | 3,536 | |
| MGE Energy, Inc. | | | 343 | | | | (0.49 | )% | | | 3,433 | |
| American States Water Co. | | | 639 | | | | (1.14 | )% | | | 2,862 | |
| American Water Works Company, Inc. | | | 547 | | | | (1.43 | )% | | | 1,767 | |
| Alliant Energy Corp. | | | 325 | | | | (0.34 | )% | | | 1,582 | |
| California Water Service Group | | | 884 | | | | (0.97 | )% | | | 1,312 | |
| Atmos Energy Corp. | | | 238 | | | | (0.52 | )% | | | 935 | |
| NextEra Energy, Inc. | | | 146 | | | | (0.77 | )% | | | (406 | ) |
| Total Utilities | | | | | | | | | | | 34,327 | |
| Industrial | | | | | | | | | | | | |
| TransDigm Group, Inc. | | | 252 | | | | (1.79 | )% | | | 30,827 | |
| Waste Management, Inc. | | | 780 | | | | (1.58 | )% | | | 18,563 | |
| HEICO Corp. | | | 218 | | | | (0.36 | )% | | | 11,992 | |
| Materion Corp. | | | 480 | | | | (0.37 | )% | | | 10,666 | |
| Tetra Tech, Inc. | | | 585 | | | | (0.90 | )% | | | 9,845 | |
| Roper Technologies, Inc. | | | 108 | | | | (0.74 | )% | | | 6,423 | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
LONG SHORT EQUITY FUND | |
| | | Shares | | | Percentage
Notional
Amount | | | Value and
Unrealized
Appreciation | |
| Casella Waste Systems, Inc. — Class A | | | 1,010 | | | | (0.86 | )% | | $ | 6,355 | |
| Sonoco Products Co. | | | 600 | | | | (0.61 | )% | | | 5,600 | |
| Republic Services, Inc. — Class A | | | 311 | | | | (0.51 | )% | | | 4,962 | |
| Ball Corp. | | | 942 | | | | (1.33 | )% | | | 2,462 | |
| Exponent, Inc. | | | 797 | | | | (1.25 | )% | | | 125 | |
| Total Industrial | | | | | | | | | | | 107,820 | |
| Basic Materials | | | | | | | | | | | | |
| Kaiser Aluminum Corp. | | | 505 | | | | (0.77 | )% | | | 17,698 | |
| PPG Industries, Inc. | | | 421 | | | | (0.77 | )% | | | 12,478 | |
| Compass Minerals International, Inc. | | | 760 | | | | (0.64 | )% | | | 12,108 | |
| Linde plc | | | 305 | | | | (1.16 | )% | | | 8,531 | |
| RPM International, Inc. | | | 1,068 | | | | (1.39 | )% | | | 7,645 | |
| | | | | | | | | | | | Value and
Unrealized
Appreciation
(Depreciation) | |
| Southern Copper Corp. | | | 520 | | | | (0.32 | )% | | $ | 7,303 | |
| Sherwin-Williams Co. | | | 83 | | | | (0.83 | )% | | | 5,501 | |
| Newmont Corp. | | | 1,983 | | | | (1.97 | )% | | | (2,402 | ) |
| Balchem Corp. | | | 833 | | | | (1.80 | )% | | | (5,349 | ) |
| Total Basic Materials | | | | | | | | | | | 63,513 | |
| Communications | | | | | | | | | | | | |
| 8x8, Inc. | | | 1,760 | | | | (0.53 | )% | | | 11,414 | |
| Q2 Holdings, Inc. | | | 488 | | | | (0.63 | )% | | | 7,286 | |
| Proofpoint, Inc. | | | 309 | | | | (0.69 | )% | | | 4,914 | |
| Trade Desk, Inc. — Class A | | | 38 | | | | (0.16 | )% | | | 1,271 | |
| Okta, Inc. | | | 180 | | | | (0.48 | )% | | | (249 | ) |
| Total Communications | | | | | | | | | | | 24,636 | |
| Consumer, Cyclical | | | | | | | | | | | | |
| Copart, Inc. | | | 1,070 | | | | (1.60 | )% | | | 28,436 | |
| Total MS Equity Short Custom Basket | | | | | | | | | | | 560,203 | |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is pledged as equity custom basket swap collateral at March 31, 2020. |
2 | Rate indicated is the 7-day yield as of March 31, 2020. |
| | GS — Goldman Sachs International |
| | MS — Morgan Stanley Capital Services LLC |
| | plc — Public Limited Company |
| | REIT — Real Estate Investment Trust |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 11,877,439 | | | $ | — | | | $ | — | | | $ | 11,877,439 | |
Money Market Fund | | | 1,855,620 | | | | — | | | | — | | | | 1,855,620 | |
Equity Custom Basket Swap Agreements** | | | — | | | | 1,178,278 | | | | — | | | | 1,178,278 | |
Total Assets | | $ | 13,733,059 | | | $ | 1,178,278 | | | $ | — | | | $ | 14,911,337 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Custom Basket Swap Agreements** | | $ | — | | | $ | 1,541,258 | | | $ | — | | | $ | 1,541,258 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value (cost $16,100,543) | | $ | 13,733,059 | |
Unrealized appreciation on OTC swap agreements | | | 1,178,278 | |
Receivables: |
Swap settlement | | | 1,350,128 | |
Securities sold | | | 51,335 | |
Dividends | | | 20,498 | |
Fund shares sold | | | 80 | |
Total assets | | | 16,333,378 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 1,541,258 | |
Payable for: |
Management fees | | | 10,848 | |
Transfer agent and administrative fees | | | 3,839 | |
Distribution and service fees | | | 2,991 | |
Portfolio accounting fees | | | 1,206 | |
Trustees’ fees* | | | 328 | |
Fund shares redeemed | | | 25 | |
Miscellaneous | | | 21,636 | |
Total liabilities | | | 1,582,131 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 14,751,247 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 20,712,610 | |
Total distributable earnings (loss) | | | (5,961,363 | ) |
Net assets | | $ | 14,751,247 | |
| | | | | |
A-Class: |
Net assets | | $ | 7,020,539 | |
Capital shares outstanding | | | 497,202 | |
Net asset value per share | | $ | 14.12 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 14.82 | |
| | | | | |
C-Class: |
Net assets | | $ | 566,699 | |
Capital shares outstanding | | | 45,733 | |
Net asset value per share | | $ | 12.39 | |
| | | | | |
P-Class: |
Net assets | | $ | 5,369,752 | |
Capital shares outstanding | | | 379,072 | |
Net asset value per share | | $ | 14.17 | |
| | | | | |
Institutional Class: |
Net assets | | $ | 1,794,257 | |
Capital shares outstanding | | | 123,867 | |
Net asset value per share | | $ | 14.49 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends | | $ | 467,635 | |
Income from securities lending, net | | | 819 | |
Total investment income | | | 468,454 | |
| | | | | |
Expenses: |
Management fees | | | 178,810 | |
Distribution and service fees: |
A-Class | | | 21,870 | |
C-Class | | | 8,937 | |
P-Class | | | 20,522 | |
Transfer agent and administrative fees | | | 50,495 | |
Portfolio accounting fees | | | 19,867 | |
Registration fees | | | 19,078 | |
Professional fees | | | 9,810 | |
Trustees’ fees* | | | 4,990 | |
Custodian fees | | | 3,030 | |
Miscellaneous | | | 17,823 | |
Total expenses | | | 355,232 | |
Net investment income | | | 113,222 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | 971,250 | |
Swap agreements | | | 129,462 | |
Net realized gain | | | 1,100,712 | |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (3,166,232 | ) |
Swap agreements | | | (295,398 | ) |
Net change in unrealized appreciation (depreciation) | | | (3,461,630 | ) |
Net realized and unrealized loss | | | (2,360,918 | ) |
Net decrease in net assets resulting from operations | | $ | (2,247,696 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 113,222 | | | $ | 95,241 | |
Net realized gain (loss) on investments | | | 1,100,712 | | | | (3,806,811 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (3,461,630 | ) | | | 2,172,534 | |
Net decrease in net assets resulting from operations | | | (2,247,696 | ) | | | (1,539,036 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (68,033 | ) | | | (186,614 | ) |
C-Class | | | — | | | | (32,272 | ) |
P-Class | | | (66,392 | ) | | | (181,349 | ) |
Institutional Class | | | (19,220 | ) | | | (38,261 | ) |
Total distributions to shareholders | | | (153,645 | ) | | | (438,496 | ) |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 577,147 | | | | 8,704,774 | |
C-Class | | | 7,950 | | | | 28,175 | |
P-Class | | | 323,678 | | | | 1,075,439 | |
Institutional Class | | | 835,323 | | | | 841,185 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 67,459 | | | | 183,572 | |
C-Class | | | — | | | | 32,052 | |
P-Class | | | 61,922 | | | | 171,465 | |
Institutional Class | | | 19,220 | | | | 38,261 | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (2,659,455 | ) | | | (2,055,064 | ) |
C-Class | | | (754,681 | ) | | | (9,729,027 | ) |
P-Class | | | (3,414,692 | ) | | | (3,739,420 | ) |
Institutional Class | | | (798,573 | ) | | | (1,428,171 | ) |
Net decrease from capital share transactions | | | (5,734,702 | ) | | | (5,876,759 | ) |
Net decrease in net assets | | | (8,136,043 | ) | | | (7,854,291 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 22,887,290 | | | | 30,741,581 | |
End of year | | $ | 14,751,247 | | | $ | 22,887,290 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 36,834 | | | | 507,240 | |
C-Class | | | 575 | | | | 1,935 | |
P-Class | | | 20,296 | | | | 62,121 | |
Institutional Class | | | 51,644 | | | | 48,459 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 4,146 | | | | 11,339 | |
C-Class | | | — | | | | 2,252 | |
P-Class | | | 3,794 | | | | 10,558 | |
Institutional Class | | | 1,152 | | | | 2,308 | |
Shares redeemed | | | | | | | | |
A-Class | | | (169,933 | ) | | | (122,808 | ) |
C-Class | | | (55,084 | ) | | | (642,616 | ) |
P-Class | | | (217,505 | ) | | | (222,239 | ) |
Institutional Class | | | (50,497 | ) | | | (82,197 | ) |
Net decrease in shares | | | (374,578 | ) | | | (423,648 | ) |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 16.20 | | | $ | 17.41 | | | $ | 15.80 | | | $ | 15.26 | | | $ | 16.16 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .09 | | | | .10 | | | | — | b | | | (.09 | ) | | | (.10 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (2.04 | ) | | | (1.02 | ) | | | 1.61 | | | | .63 | | | | (.80 | ) |
Total from investment operations | | | (1.95 | ) | | | (.92 | ) | | | 1.61 | | | | .54 | | | | (.90 | ) |
Less distributions from: |
Net investment income | | | (.13 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | (.29 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (.13 | ) | | | (.29 | ) | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 14.12 | | | $ | 16.20 | | | $ | 17.41 | | | $ | 15.80 | | | $ | 15.26 | |
|
Total Returnc | | | (12.15 | %) | | | (5.31 | %) | | | 10.19 | % | | | 3.54 | % | | | (5.57 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 7,021 | | | $ | 10,143 | | | $ | 4,012 | | | $ | 4,615 | | | $ | 10,803 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.58 | % | | | 0.58 | % | | | 0.01 | % | | | (0.59 | %) | | | (0.66 | %) |
Total expenses d,e | | | 1.78 | % | | | 1.78 | % | | | 1.77 | % | | | 2.25 | % | | | 2.53 | % |
Portfolio turnover rate | | | 119 | % | | | 170 | % | | | 328 | % | | | 223 | % | | | 224 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 14.21 | | | $ | 15.43 | | | $ | 14.11 | | | $ | 13.72 | | | $ | 14.64 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.02 | ) | | | (.07 | ) | | | (.11 | ) | | | (.18 | ) | | | (.21 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (1.80 | ) | | | (.86 | ) | | | 1.43 | | | | .57 | | | | (.71 | ) |
Total from investment operations | | | (1.82 | ) | | | (.93 | ) | | | 1.32 | | | | .39 | | | | (.92 | ) |
Less distributions from: |
Net realized gains | | | — | | | | (.29 | ) | | | — | | | | — | | | | — | |
Total distributions | | | — | | | | (.29 | ) | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 12.39 | | | $ | 14.21 | | | $ | 15.43 | | | $ | 14.11 | | | $ | 13.72 | |
|
Total Returnc | | | (12.81 | %) | | | (6.00 | %) | | | 9.36 | % | | | 2.77 | % | | | (6.28 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 567 | | | $ | 1,424 | | | $ | 11,394 | | | $ | 13,235 | | | $ | 16,760 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.18 | %) | | | (0.43 | %) | | | (0.74 | %) | | | (1.30 | %) | | | (1.45 | %) |
Total expenses d,e | | | 2.53 | % | | | 2.50 | % | | | 2.52 | % | | | 2.98 | % | | | 3.24 | % |
Portfolio turnover rate | | | 119 | % | | | 170 | % | | | 328 | % | | | 223 | % | | | 224 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
P-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 16.25 | | | $ | 17.47 | | | $ | 15.86 | | | $ | 15.31 | | | $ | 16.21 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .09 | | | | .08 | | | | — | b | | | (.09 | ) | | | (.11 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (2.04 | ) | | | (1.01 | ) | | | 1.61 | | | | .64 | | | | (.79 | ) |
Total from investment operations | | | (1.95 | ) | | | (.93 | ) | | | 1.61 | | | | .55 | | | | (.90 | ) |
Less distributions from: |
Net investment income | | | (.13 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | (.29 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (.13 | ) | | | (.29 | ) | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 14.17 | | | $ | 16.25 | | | $ | 17.47 | | | $ | 15.86 | | | $ | 15.31 | |
|
Total Return | | | (12.17 | %) | | | (5.35 | %) | | | 10.15 | % | | | 3.53 | % | | | (5.55 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 5,370 | | | $ | 9,303 | | | $ | 12,614 | | | $ | 13,779 | | | $ | 23,477 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.57 | % | | | 0.47 | % | | | 0.01 | % | | | (0.58 | %) | | | (0.67 | %) |
Total expenses d,e | | | 1.78 | % | | | 1.77 | % | | | 1.76 | % | | | 2.24 | % | | | 2.50 | % |
Portfolio turnover rate | | | 119 | % | | | 170 | % | | | 328 | % | | | 223 | % | | | 224 | % |
28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Institutional Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 16.60 | | | $ | 17.79 | | | $ | 16.11 | | | $ | 15.50 | | | $ | 16.38 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .14 | | | | .12 | | | | .05 | | | | (.03 | ) | | | (.05 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (2.10 | ) | | | (1.02 | ) | | | 1.63 | | | | .64 | | | | (.83 | ) |
Total from investment operations | | | (1.96 | ) | | | (.90 | ) | | | 1.68 | | | | .61 | | | | (.88 | ) |
Less distributions from: |
Net investment income | | | (.15 | ) | | | — | | | | — | | | | — | | | | — | |
Net realized gains | | | — | | | | (.29 | ) | | | — | | | | — | | | | — | |
Total distributions | | | (.15 | ) | | | (.29 | ) | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 14.49 | | | $ | 16.60 | | | $ | 17.79 | | | $ | 16.11 | | | $ | 15.50 | |
|
Total Return | | | (11.96 | %) | | | (5.08 | %) | | | 10.43 | % | | | 3.94 | % | | | (5.37 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,794 | | | $ | 2,018 | | | $ | 2,722 | | | $ | 1,990 | | | $ | 525 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.85 | % | | | 0.72 | % | | | 0.31 | % | | | (0.20 | %) | | | (0.29 | %) |
Total expenses d,e | | | 1.53 | % | | | 1.51 | % | | | 1.50 | % | | | 1.96 | % | | | 2.27 | % |
Portfolio turnover rate | | | 119 | % | | | 170 | % | | | 328 | % | | | 223 | % | | | 224 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Net investment income is less than $0.01 per share. |
c | Total return does not reflect the impact of any applicable sales charges. |
d | Does not include expenses of the underlying funds in which the Fund invests. |
e | Excluding interest and dividend expense related to short sales, the operating expense ratios for the years or periods presented was as follows: |
| | | 03/31/20 | 03/31/19 | 03/31/18 | 03/31/17 | 03/31/16 |
| | A-Class | 1.78% | 1.78% | 1.68% | 1.67% | 1.66% |
| | C-Class | 2.53% | 2.50% | 2.44% | 2.42% | 2.41% |
| | P-Class | 1.78% | 1.77% | 1.69% | 1.67% | 1.66% |
| | Institutional Class | 1.53% | 1.51% | 1.43% | 1.43% | 1.41% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
EMERGING MARKETS 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the BNY Mellon Emerging Markets 50 ADR Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Emerging Markets 2x Strategy Fund H-Class returned -37.27%, while the BNY Mellon Emerging Markets 50 ADR Index returned -16.81% over the same period.
For the period, Emerging Markets 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the BNY Mellon Emerging Markets 50 ADR Index.
The sectors that contributed the most to the performance of the underlying index over the past year were Consumer Discretionary, Information Technology, and Industrials. The sectors that detracted the most were Financials, Energy, and Communication Services.
The stocks that contributed the most to the return of the underlying index over the past year were Taiwan Semiconductor Manufacturing Co., Alibaba Group Holding Ltd. ADR, and JD.com, Inc. ADR Class A. The stocks that detracted the most were Itau Unibanco Holding S.A. Preferred ADR, Sasol Ltd. ADR, and HDFC Bank Ltd. ADR.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the most efficient manner possible and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and were factors in the Fund’s negative performance.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | October 29, 2010 |
C-Class | October 29, 2010 |
H-Class | October 29, 2010 |
30 | THE RYDEX FUNDS ANNUAL REPORT | |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
COUNTRY DIVERSIFICATION
Country | % of Long-Term
Investments |
China | 32.6% |
Taiwan, Province of China | 21.2% |
Cayman Islands | 13.4% |
Brazil | 10.4% |
India | 10.4% |
Republic of Korea | 4.5% |
Mexico | 3.2% |
Other | 4.3% |
Total Long-Term Investments | 100.0% |
Cumulative Fund Performance*
Ten Largest Holdings (% of Total Net Assets) |
Alibaba Group Holding Ltd. ADR | 5.3% |
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 4.9% |
HDFC Bank Ltd. ADR | 1.4% |
China Mobile Ltd. ADR | 1.1% |
JD.com, Inc. ADR | 1.0% |
Infosys Ltd. ADR | 0.8% |
Baidu, Inc. ADR | 0.8% |
Vale S.A. ADR | 0.7% |
NetEase, Inc. ADR | 0.6% |
Itau Unibanco Holding S.A. ADR | 0.6% |
Top Ten Total | 17.2% |
| | |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | Since
Inception
(10/29/10) |
A-Class Shares | (37.27%) | (5.65%) | (9.50%) |
A-Class Shares with sales charge‡ | (40.25%) | (6.57%) | (9.97%) |
C-Class Shares | (37.73%) | (6.37%) | (10.05%) |
C-Class Shares with CDSC§ | (38.35%) | (6.37%) | (10.05%) |
H-Class Shares | (37.27%) | (5.68%) | (9.50%) |
BNY Mellon Emerging Markets 50 ADR Index | (16.81%) | 1.27% | (1.00%) |
S&P 500 Index | (6.98%) | 6.73% | 10.94% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The BNY Mellon Emerging Markets 50 ADR Index and S&P 500 Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| | THE RYDEX FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
EMERGING MARKETS 2x STRATEGY FUND | |
| | Shares | | | Value | |
COMMON STOCKS† - 25.4% |
| | | | | | | | | |
Communications - 10.6% |
Alibaba Group Holding Ltd. ADR* | | | 610 | | | $ | 118,633 | |
China Mobile Ltd. ADR | | | 684 | | | | 25,766 | |
JD.com, Inc. ADR* | | | 540 | | | | 21,870 | |
Baidu, Inc. ADR* | | | 170 | | | | 17,134 | |
America Movil SAB de CV — Class L ADR | | | 721 | | | | 8,493 | |
Chunghwa Telecom Company Ltd. ADR | | | 235 | | | | 8,359 | |
Pinduoduo, Inc. ADR* | | | 223 | | | | 8,034 | |
Trip.com Group Ltd. ADR* | | | 253 | | | | 5,933 | |
Telekomunikasi Indonesia Persero Tbk PT ADR | | | 294 | | | | 5,660 | |
SK Telecom Company Ltd. ADR | | | 184 | | | | 2,994 | |
iQIYI, Inc. ADR* | | | 166 | | | | 2,955 | |
58.com, Inc. ADR* | | | 57 | | | | 2,777 | |
China Telecom Corporation Ltd. ADR | | | 86 | | | | 2,625 | |
Telefonica Brasil S.A. ADR | | | 256 | | | | 2,440 | |
Momo, Inc. ADR | | | 97 | | | | 2,104 | |
Grupo Televisa SAB ADR | | | 313 | | | | 1,815 | |
Total Communications | | | | | | | 237,592 | |
| | | | | | | | | |
Technology - 6.8% |
Taiwan Semiconductor Manufacturing Company Ltd. ADR | | | 2,329 | | | | 111,303 | |
2252586 Infosys Ltd. ADR | | | 2,310 | | | | 18,965 | |
NetEase, Inc. ADR | | | 43 | | | | 13,801 | |
ASE Technology Holding Company Ltd. ADR | | | 949 | | | | 3,549 | |
United Microelectronics Corp. ADR | | | 1,261 | | | | 2,737 | |
Wipro Ltd. ADR | | | 848 | | | | 2,629 | |
Total Technology | | | | | | | 152,984 | |
| | | | | | | | | |
Financial - 3.4% |
HDFC Bank Ltd. ADR | | | 825 | | | | 31,730 | |
Banco Bradesco S.A. ADR | | | 2,491 | | | | 10,114 | |
China Life Insurance Company Ltd. ADR | | | 920 | | | | 8,979 | |
ICICI Bank Ltd. ADR | | | 972 | | | | 8,262 | |
Shinhan Financial Group* Company Ltd. ADR | | | 291 | | | | 6,783 | |
KB Financial Group, Inc. ADR* | | | 243 | | | | 6,607 | |
Woori Financial Group, Inc. ADR* | | | 103 | | | | 1,934 | |
Bancolombia S.A. ADR | | | 70 | | | | 1,747 | |
Total Financial | | | | | | | 76,156 | |
| | | | | | | | | |
Consumer, Non-cyclical - 1.6% |
TAL Education Group ADR* | | | 238 | | | | 12,676 | |
New Oriental Education & Technology Group, Inc. ADR* | | | 73 | | | | 7,902 | |
Fomento Economico Mexicano SAB de CV ADR | | | 115 | | | | 6,959 | |
Ambev S.A. ADR | | | 2,722 | | | | 6,260 | |
BeiGene Ltd. ADR* | | | 16 | | | | 1,970 | |
BRF S.A. ADR* | | | 447 | | | | 1,296 | |
Total Consumer, Non-cyclical | | | | | | | 37,063 | |
| | | | | | | | | |
Energy - 1.2% |
CNOOC Ltd. ADR | | | 99 | | | | 10,243 | |
China Petroleum & Chemical Corp. ADR | | | 158 | | | | 7,695 | |
PetroChina Company Ltd. ADR | | | 130 | | | | 4,680 | |
Petroleo Brasileiro S.A. ADR | | | 828 | | | | 4,554 | |
Total Energy | | | | | | | 27,172 | |
| | | | | | | | | |
Basic Materials - 1.2% |
Vale S.A. ADR | | | 1,960 | | | | 16,248 | |
POSCO ADR | | | 175 | | | | 5,714 | |
AngloGold Ashanti Ltd. ADR | | | 255 | | | | 4,241 | |
Sasol Ltd. ADR* | | | 354 | | | | 711 | |
Total Basic Materials | | | | | | | 26,914 | |
| | | | | | | | | |
Industrial - 0.4% |
ZTO Express Cayman, Inc. ADR* | | | 267 | | | | 7,070 | |
Cemex SAB de CV ADR | | | 936 | | | | 1,985 | |
Total Industrial | | | | | | | 9,055 | |
| | | | | | | | | |
Utilities - 0.2% |
Enel Americas S.A. ADR | | | 452 | | | | 2,739 | |
Korea Electric Power Corp. ADR* | | | 317 | | | | 2,393 | |
Total Utilities | | | | | | | 5,132 | |
| | | | | | | | | |
Total Common Stocks | | | | |
(Cost $533,215) | | | | | | | 572,068 | |
| | | | | | | | | |
PREFERRED STOCKS† - 0.9% |
Financial - 0.6% |
Itau Unibanco Holding S.A. ADR | | | 2,995 | | | | 13,447 | |
| | | | | | | | | |
Energy - 0.3% |
Petroleo Brasileiro S.A. ADR | | | 1,385 | | | | 7,465 | |
Total Preferred Stocks | | | | |
(Cost $30,618) | | | | | | | 20,912 | |
| | | | | | | | | |
| | | Face
Amount | | | | | |
U.S. TREASURY BILLS†† - 0.2% |
U.S. Treasury Bills |
0.50% due 04/30/201,2 | | $ | 4,000 | | | | 4,000 | |
Total U.S. Treasury Bills | | | | |
(Cost $3,998) | | | | | | | 4,000 | |
| | | | | | | | | |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | March 31, 2020 |
EMERGING MARKETS 2x STRATEGY FUND | |
| | | Face
Amount | | | Value | |
REPURCHASE AGREEMENTS††,3 - 49.1% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/204 | | $ | 799,097 | | | $ | 799,097 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/204 | | | 307,345 | | | | 307,345 | |
| Total Repurchase Agreements | | | | | | | | |
| (Cost $1,106,442) | | | | | | | 1,106,442 | |
| | | | | | | | | |
| Total Investments - 75.6% | | | | | | | | |
| (Cost $1,674,273) | | | | | | $ | 1,703,422 | |
| Other Assets & Liabilities, net - 24.4% | | | | | | | 549,164 | |
| Total Net Assets - 100.0% | | | | | | $ | 2,252,586 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Equity Futures Contracts Purchased† |
MSCI Emerging Markets Index Futures Contracts | | | 2 | | | | Jun 2020 | | | $ | 84,470 | | | $ | 107 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Depreciation | |
OTC Equity Index Swap Agreements†† |
BNP Paribas | BNY Mellon Emerging Markets 50 ADR Index | 1.59% (1 Month USD LIBOR + 0.60%) | At Maturity | | | 04/29/20 | | | | 700 | | | $ | 1,500,941 | | | $ | (49,108 | ) |
Goldman Sachs International | BNY Mellon Emerging Markets 50 ADR Index | 1.14% (1 Week USD LIBOR + 0.55%) | At Maturity | | | 04/28/20 | | | | 1,100 | | | | 2,359,055 | | | | (53,337 | ) |
| | | | | | | | | | | | | | $ | 3,859,996 | | | $ | (102,445 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | ADR — American Depositary Receipt |
| | LIBOR — London Interbank Offered Rate |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
EMERGING MARKETS 2x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Common Stocks | | $ | 572,068 | | | $ | — | | | $ | — | | | $ | 572,068 | |
Preferred Stocks | | | 20,912 | | | | — | | | | — | | | | 20,912 | |
U.S. Treasury Bills | | | — | | | | 4,000 | | | | — | | | | 4,000 | |
Repurchase Agreements | | | — | | | | 1,106,442 | | | | — | | | | 1,106,442 | |
Equity Futures Contracts** | | | 107 | | | | — | | | | — | | | | 107 | |
Total Assets | | $ | 593,087 | | | $ | 1,110,442 | | | $ | — | | | $ | 1,703,529 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 102,445 | | | $ | — | | | $ | 102,445 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EMERGING MARKETS 2x STRATEGY FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value (cost $567,831) | | $ | 596,980 | |
Repurchase agreements, at value (cost $1,106,442) | | | 1,106,442 | |
Cash | | | 458,828 | |
Segregated cash with broker | | | 7,020 | |
Receivables: |
Fund shares sold | | | 298,425 | |
Dividends | | | 8,558 | |
Foreign tax reclaims | | | 4 | |
Total assets | | | 2,476,257 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 102,445 | |
Payable for: |
Fund shares redeemed | | | 66,562 | |
Swap settlement | | | 42,032 | |
Management fees | | | 2,057 | |
Variation margin on futures contracts | | | 1,111 | |
Transfer agent and administrative fees | | | 853 | |
Distribution and service fees | | | 680 | |
Portfolio accounting fees | | | 343 | |
Trustees’ fees* | | | 66 | |
Miscellaneous | | | 7,522 | |
Total liabilities | | | 223,671 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 2,252,586 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 17,186,052 | |
Total distributable earnings (loss) | | | (14,933,466 | ) |
Net assets | | $ | 2,252,586 | |
| | | | | |
A-Class: |
Net assets | | $ | 627,603 | |
Capital shares outstanding | | | 14,170 | |
Net asset value per share | | $ | 44.29 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 46.50 | |
| | | | | |
C-Class: |
Net assets | | $ | 161,310 | |
Capital shares outstanding | | | 3,860 | |
Net asset value per share | | $ | 41.79 | |
| | | | | |
H-Class: |
Net assets | | $ | 1,463,673 | |
Capital shares outstanding | | | 33,045 | |
Net asset value per share | | $ | 44.29 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Dividends (net of foreign withholding tax of $1,857) | | $ | 94,077 | |
Interest | | | 49,622 | |
Income from securities lending, net | | | 19 | |
Total investment income | | | 143,718 | |
| | | | | |
Expenses: |
Management fees | | | 69,453 | |
Distribution and service fees: |
A-Class | | | 3,071 | |
C-Class | | | 3,004 | |
H-Class | | | 15,476 | |
Transfer agent and administrative fees | | | 19,576 | |
Portfolio accounting fees | | | 11,578 | |
Registration fees | | | 8,061 | |
Professional fees | | | 3,981 | |
Licensing fees | | | 3,096 | |
Trustees’ fees* | | | 2,129 | |
Custodian fees | | | 1,242 | |
Line of credit fees | | | 59 | |
Miscellaneous | | | 5,395 | |
Total expenses | | | 146,121 | |
Net investment loss | | | (2,403 | ) |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (312,540 | ) |
Swap agreements | | | (3,483,044 | ) |
Futures contracts | | | (31,458 | ) |
Net realized loss | | | (3,827,042 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | (825,775 | ) |
Swap agreements | | | (285,063 | ) |
Futures contracts | | | (78 | ) |
Net change in unrealized appreciation (depreciation) | | | (1,110,916 | ) |
Net realized and unrealized loss | | | (4,937,958 | ) |
Net decrease in net assets resulting from operations | | $ | (4,940,361 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
EMERGING MARKETS 2x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income (loss) | | $ | (2,403 | ) | | $ | 72,708 | |
Net realized loss on investments | | | (3,827,042 | ) | | | (4,080,724 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | (1,110,916 | ) | | | (811,319 | ) |
Net decrease in net assets resulting from operations | | | (4,940,361 | ) | | | (4,819,335 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (7,524 | ) | | | — | |
C-Class | | | (1,845 | ) | | | — | |
H-Class | | | (35,229 | ) | | | — | |
Total distributions to shareholders | | | (44,598 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 903,892 | | | | 3,128,163 | |
C-Class | | | 1,815,669 | | | | 1,588,188 | |
H-Class | | | 214,239,492 | | | | 340,236,253 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 7,503 | | | | — | |
C-Class | | | 1,805 | | | | — | |
H-Class | | | 34,340 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (2,144,611 | ) | | | (3,658,363 | ) |
C-Class | | | (1,980,620 | ) | | | (1,600,378 | ) |
H-Class | | | (214,946,228 | ) | | | (356,547,878 | ) |
Net decrease from capital share transactions | | | (2,068,758 | ) | | | (16,854,015 | ) |
Net decrease in net assets | | | (7,053,717 | ) | | | (21,673,350 | ) |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 9,306,303 | | | | 30,979,653 | |
End of year | | $ | 2,252,586 | | | $ | 9,306,303 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 14,019 | | | | 44,229 | |
C-Class | | | 27,838 | | | | 25,248 | |
H-Class | | | 3,178,461 | | | | 4,741,011 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 93 | | | | — | |
C-Class | | | 24 | | | | — | |
H-Class | | | 426 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (31,579 | ) | | | (49,144 | ) |
C-Class | | | (30,269 | ) | | | (25,234 | ) |
H-Class | | | (3,239,286 | ) | | | (4,960,263 | ) |
Net decrease in shares | | | (80,273 | ) | | | (224,153 | ) |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EMERGING MARKETS 2x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 71.02 | | | $ | 87.20 | | | $ | 60.99 | | | $ | 44.79 | | | $ | 60.50 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .17 | | | | .40 | | | | (.24 | ) | | | (.48 | ) | | | (.23 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (26.42 | ) | | | (16.58 | ) | | | 26.45 | | | | 16.68 | | | | (14.83 | ) |
Total from investment operations | | | (26.25 | ) | | | (16.18 | ) | | | 26.21 | | | | 16.20 | | | | (15.06 | ) |
Less distributions from: |
Net investment income | | | (.48 | ) | | | — | | | | — | | | | — | | | | (.65 | ) |
Total distributions | | | (.48 | ) | | | — | | | | — | | | | — | | | | (.65 | ) |
Net asset value, end of period | | $ | 44.29 | | | $ | 71.02 | | | $ | 87.20 | | | $ | 60.99 | | | $ | 44.79 | |
|
Total Returnb | | | (37.27 | %) | | | (18.56 | %) | | | 42.97 | % | | | 36.17 | % | | | (24.84 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 628 | | | $ | 2,247 | | | $ | 3,187 | | | $ | 628 | | | $ | 3,988 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.25 | % | | | 0.54 | % | | | (0.30 | %) | | | (0.96 | %) | | | (0.48 | %) |
Total expenses | | | 1.86 | % | | | 1.84 | % | | | 1.76 | % | | | 1.76 | % | | | 1.75 | % |
Portfolio turnover rate | | | 974 | % | | | 1,978 | % | | | 1,006 | % | | | 2,568 | % | | | 2,874 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 67.53 | | | $ | 83.55 | | | $ | 58.90 | | | $ | 43.56 | | | $ | 59.37 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.28 | ) | | | (.22 | ) | | | (.61 | ) | | | (.79 | ) | | | (.74 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (24.98 | ) | | | (15.80 | ) | | | 25.26 | | | | 16.13 | | | | (14.42 | ) |
Total from investment operations | | | (25.26 | ) | | | (16.02 | ) | | | 24.65 | | | | 15.34 | | | | (15.16 | ) |
Less distributions from: |
Net investment income | | | (.48 | ) | | | — | | | | — | | | | — | | | | (.65 | ) |
Total distributions | | | (.48 | ) | | | — | | | | — | | | | — | | | | (.65 | ) |
Net asset value, end of period | | $ | 41.79 | | | $ | 67.53 | | | $ | 83.55 | | | $ | 58.90 | | | $ | 43.56 | |
|
Total Returnb | | | (37.73 | %) | | | (19.17 | %) | | | 41.87 | % | | | 35.19 | % | | | (25.48 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 161 | | | $ | 423 | | | $ | 522 | | | $ | 361 | | | $ | 271 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.44 | %) | | | (0.33 | %) | | | (0.82 | %) | | | (1.55 | %) | | | (1.49 | %) |
Total expenses | | | 2.60 | % | | | 2.59 | % | | | 2.56 | % | | | 2.50 | % | | | 2.46 | % |
Portfolio turnover rate | | | 974 | % | | | 1,978 | % | | | 1,006 | % | | | 2,568 | % | | | 2,874 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
EMERGING MARKETS 2x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017 | | | Year Ended
March 31,
2016 | |
Per Share Data |
Net asset value, beginning of period | | $ | 71.02 | | | $ | 87.21 | | | $ | 61.01 | | | $ | 44.84 | | | $ | 60.61 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.05 | ) | | | .50 | | | | (.25 | ) | | | (.42 | ) | | | (.41 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (26.20 | ) | | | (16.69 | ) | | | 26.45 | | | | 16.59 | | | | (14.71 | ) |
Total from investment operations | | | (26.25 | ) | | | (16.19 | ) | | | 26.20 | | | | 16.17 | | | | (15.12 | ) |
Less distributions from: |
Net investment income | | | (.48 | ) | | | — | | | | — | | | | — | | | | (.65 | ) |
Total distributions | | | (.48 | ) | | | — | | | | — | | | | — | | | | (.65 | ) |
Net asset value, end of period | | $ | 44.29 | | | $ | 71.02 | | | $ | 87.21 | | | $ | 61.01 | | | $ | 44.84 | |
|
Total Return | | | (37.27 | %) | | | (18.56 | %) | | | 42.95 | % | | | 36.04 | % | | | (24.88 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,464 | | | $ | 6,636 | | | $ | 27,270 | | | $ | 6,698 | | | $ | 13,238 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.07 | %) | | | 0.71 | % | | | (0.32 | %) | | | (0.82 | %) | | | (0.76 | %) |
Total expenses | | | 1.87 | % | | | 1.85 | % | | | 1.77 | % | | | 1.76 | % | | | 1.74 | % |
Portfolio turnover rate | | | 974 | % | | | 1,978 | % | | | 1,006 | % | | | 2,568 | % | | | 2,874 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
INVERSE EMERGING MARKETS 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the inverse (opposite) of the performance of the BNY Mellon Emerging Markets 50 ADR Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2020, Inverse Emerging Markets 2x Strategy Fund H-Class returned 16.40%, while the BNY Mellon Emerging Markets 50 ADR Index returned -16.81% over the same period.
For the period, Inverse Emerging Markets 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the BNY Mellon Emerging Markets 50 ADR Index.
The sectors that contributed the most to the performance of the underlying index over the past year were Consumer Discretionary, Information Technology, and Industrials. The sectors that detracted the most were Financials, Energy, and Communication Services.
The stocks that contributed the most to the return of the underlying index over the past year were Taiwan Semiconductor Manufacturing Co., Alibaba Group Holding Ltd. ADR, and JD.com, Inc. ADR Class A. The stocks that detracted the most were Itau Unibanco Holding S.A. Preferred ADR, Sasol Ltd. ADR, and HDFC Bank Ltd. ADR.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the most efficient manner possible and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s positive performance.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | October 29, 2010 |
C-Class | October 29, 2010 |
H-Class | October 29, 2010 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| | THE RYDEX FUNDS ANNUAL REPORT | 39 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | Since
Inception
(10/29/10) |
A-Class Shares | 16.30% | (14.17%) | (11.56%) |
A-Class Shares with sales charge‡ | 10.78% | (15.00%) | (12.01%) |
C-Class Shares | 16.96% | (14.60%) | (11.53%) |
C-Class Shares with CDSC§ | 15.96% | (14.60%) | (11.53%) |
H-Class Shares | 16.40% | (14.20%) | (11.62%) |
BNY Mellon Emerging Markets 50 ADR Index | (16.81%) | 1.27% | (1.00%) |
S&P 500 Index | (6.98%) | 6.73% | 10.94% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The BNY Mellon Emerging Markets 50 ADR Index and the S&P 500 Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
40 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
INVERSE EMERGING MARKETS 2x STRATEGY FUND | |
| | Face
Amount | | | Value | |
REPURCHASE AGREEMENTS††,1 - 74.7% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/202 | | $ | 484,772 | | | $ | 484,772 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/202 | | | 186,451 | | | | 186,451 | |
Total Repurchase Agreements | | | | |
(Cost $671,223) | | | | | | | 671,223 | |
| | | | | | | | | |
Total Investments - 74.7% | | | | |
(Cost $671,223) | | $ | 671,223 | |
Other Assets & Liabilities, net - 25.3% | | | 227,307 | |
Total Net Assets - 100.0% | | $ | 898,530 | |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate (Receive) | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
OTC Equity Index Swap Agreements Sold Short†† |
BNP Paribas | BNY Mellon Emerging Markets 50 ADR Index | (0.69)% (1 Month USD LIBOR - 0.30%) | At Maturity | | | 04/29/20 | | | | 124 | | | $ | 264,974 | | | $ | 8,669 | |
Goldman Sachs International | BNY Mellon Emerging Markets 50 ADR Index | (0.14)% (1 Week USD LIBOR - 0.45%) | At Maturity | | | 04/28/20 | | | | 714 | | | | 1,530,626 | | | | (6,913 | ) |
| | | | | | | | | | | | | | $ | 1,795,600 | | | $ | 1,756 | |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
2 | All or a portion of this security is pledged as equity index swap collateral at March 31, 2020. |
| | ADR — American Depositary Receipt |
| | LIBOR — London Interbank Offered Rate |
| | |
| | See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
INVERSE EMERGING MARKETS 2x STRATEGY FUND | |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Repurchase Agreements | | $ | — | | | $ | 671,223 | | | $ | — | | | $ | 671,223 | |
Equity Index Swap Agreements** | | | — | | | | 8,669 | | | | — | | | | 8,669 | |
Total Assets | | $ | — | | | $ | 679,892 | | | $ | — | | | $ | 679,892 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Equity Index Swap Agreements** | | $ | — | | | $ | 6,913 | | | $ | — | | | $ | 6,913 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE EMERGING MARKETS 2x STRATEGY FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Repurchase agreements, at value (cost $671,223) | | $ | 671,223 | |
Cash | | | 377,785 | |
Unrealized appreciation on OTC swap agreements | | | 8,669 | |
Receivables: |
Fund shares sold | | | 163,227 | |
Swap settlement | | | 63,074 | |
Total assets | | | 1,283,978 | |
| | | | | |
Liabilities: |
Unrealized depreciation on OTC swap agreements | | | 6,913 | |
Payable for: |
Fund shares redeemed | | | 375,817 | |
Management fees | | | 651 | |
Transfer agent and administrative fees | | | 212 | |
Distribution and service fees | | | 190 | |
Portfolio accounting fees | | | 109 | |
Trustees’ fees* | | | 19 | |
Miscellaneous | | | 1,537 | |
Total liabilities | | | 385,448 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 898,530 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 19,250,116 | |
Total distributable earnings (loss) | | | (18,351,586 | ) |
Net assets | | $ | 898,530 | |
| | | | | |
A-Class: |
Net assets | | $ | 146,535 | |
Capital shares outstanding | | | 3,137 | |
Net asset value per share | | $ | 46.71 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 49.04 | |
| | | | | |
C-Class: |
Net assets | | $ | 102,826 | |
Capital shares outstanding | | | 2,196 | |
Net asset value per share | | $ | 46.82 | |
| | | | | |
H-Class: |
Net assets | | $ | 649,169 | |
Capital shares outstanding | | | 13,995 | |
Net asset value per share | | $ | 46.39 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Interest | | $ | 14,032 | |
Total investment income | | | 14,032 | |
| | | | | |
Expenses: |
Management fees | | | 6,231 | |
Distribution and service fees: |
A-Class | | | 76 | |
C-Class | | | 87 | |
H-Class | | | 1,638 | |
Transfer agent and administrative fees | | | 1,763 | |
Portfolio accounting fees | | | 1,041 | |
Registration fees | | | 886 | |
Trustees’ fees* | | | 441 | |
Professional fees | | | 355 | |
Custodian fees | | | 118 | |
Miscellaneous | | | 361 | |
Total expenses | | | 12,997 | |
Net investment income | | | 1,035 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Swap agreements | | | 163,330 | |
Futures contracts | | | 11,162 | |
Net realized gain | | | 174,492 | |
Net change in unrealized appreciation (depreciation) on: |
Swap agreements | | | 42,848 | |
Net change in unrealized appreciation (depreciation) | | | 42,848 | |
Net realized and unrealized gain | | | 217,340 | |
Net increase in net assets resulting from operations | | $ | 218,375 | |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
INVERSE EMERGING MARKETS 2x STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 1,035 | | | $ | 8,795 | |
Net realized gain (loss) on investments | | | 174,492 | | | | (840,947 | ) |
Net change in unrealized appreciation (depreciation) on investments | | | 42,848 | | | | (19,504 | ) |
Net increase (decrease) in net assets resulting from operations | | | 218,375 | | | | (851,656 | ) |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (74 | ) | | | — | |
C-Class | | | (291 | ) | | | — | |
H-Class | | | (4,157 | ) | | | — | |
Total distributions to shareholders | | | (4,522 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 948,187 | | | | 1,199,460 | |
C-Class | | | 1,863,277 | | | | 729,537 | |
H-Class | | | 52,112,944 | | | | 138,431,280 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 55 | | | | — | |
C-Class | | | 27 | | | | — | |
H-Class | | | 3,705 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (813,060 | ) | | | (1,206,928 | ) |
C-Class | | | (1,767,237 | ) | | | (739,662 | ) |
H-Class | | | (53,439,146 | ) | | | (136,590,922 | ) |
Net increase (decrease) from capital share transactions | | | (1,091,248 | ) | | | 1,822,765 | |
Net increase (decrease) in net assets | | | (877,395 | ) | | | 971,109 | |
| | | | | | | | | |
Net assets: | | | | | | | | |
Beginning of year | | | 1,775,925 | | | | 804,816 | |
End of year | | $ | 898,530 | | | $ | 1,775,925 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 22,942 | | | | 25,169 | |
C-Class | | | 51,267 | | | | 16,881 | |
H-Class | | | 1,307,127 | | | | 3,075,813 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 2 | | | | — | |
C-Class | | | 1 | | | | — | |
H-Class | | | 115 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (20,207 | ) | | | (25,868 | ) |
C-Class | | | (49,157 | ) | | | (17,267 | ) |
H-Class | | | (1,336,862 | ) | | | (3,051,369 | ) |
Net increase (decrease) in shares | | | (24,772 | ) | | | 23,359 | |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE EMERGING MARKETS 2x STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 40.57 | | | $ | 39.08 | | | $ | 63.42 | | | $ | 101.83 | | | $ | 101.26 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.16 | ) | | | .23 | | | | (.28 | ) | | | (1.42 | ) | | | (1.92 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 6.64 | | | | 1.26 | d | | | (24.06 | ) | | | (36.99 | ) | | | 2.49 | |
Total from investment operations | | | 6.48 | | | | 1.49 | | | | (24.34 | ) | | | (38.41 | ) | | | .57 | |
Less distributions from: |
Net investment income | | | (.34 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.34 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 46.71 | | | $ | 40.57 | | | $ | 39.08 | | | $ | 63.42 | | | $ | 101.83 | |
|
Total Returnb | | | 16.30 | % | | | 3.81 | % | | | (38.35 | %) | | | (37.72 | %) | | | 0.53 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 147 | | | $ | 16 | | | $ | 43 | | | $ | 42 | | | $ | 448 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.37 | %) | | | 0.51 | % | | | (0.64 | %) | | | (1.50 | %) | | | (1.59 | %) |
Total expenses | | | 1.89 | % | | | 1.88 | % | | | 1.76 | % | | | 1.75 | % | | | 1.75 | % |
Portfolio turnover rate | | | — | | | | — | | | | — | | | | — | | | | — | |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 40.45 | | | $ | 39.34 | | | $ | 64.21 | | | $ | 103.83 | | | $ | 104.23 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.31 | ) | | | (.29 | ) | | | (.74 | ) | | | (1.88 | ) | | | (2.82 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 7.03 | | | | 1.40 | d | | | (24.13 | ) | | | (37.74 | ) | | | 2.42 | |
Total from investment operations | | | 6.72 | | | | 1.11 | | | | (24.87 | ) | | | (39.62 | ) | | | (.40 | ) |
Less distributions from: |
Net investment income | | | (.34 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.34 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 46.82 | | | $ | 40.45 | | | $ | 39.34 | | | $ | 64.21 | | | $ | 103.83 | |
|
Total Returnb | | | 16.96 | % | | | 2.82 | % | | | (38.77 | %) | | | (38.17 | %) | | | (0.29 | %) |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 103 | | | $ | 3 | | | $ | 19 | | | $ | 56 | | | $ | 371 | |
Ratios to average net assets: |
Net investment income (loss) | | | (1.09 | %) | | | (0.63 | %) | | | (1.46 | %) | | | (2.20 | %) | | | (2.44 | %) |
Total expenses | | | 2.79 | % | | | 2.53 | % | | | 2.49 | % | | | 2.48 | % | | | 2.50 | % |
Portfolio turnover rate | | | — | | | | — | | | | — | | | | — | | | | — | |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
INVERSE EMERGING MARKETS 2x STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 40.27 | | | $ | 38.77 | | | $ | 63.00 | | | $ | 101.28 | | | $ | 100.80 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .07 | | | | .19 | | | | (.30 | ) | | | (1.23 | ) | | | (2.04 | ) |
Net gain (loss) on investments (realized and unrealized) | | | 6.39 | | | | 1.31 | d | | | (23.93 | ) | | | (37.05 | ) | | | 2.52 | |
Total from investment operations | | | 6.46 | | | | 1.50 | | | | (24.23 | ) | | | (38.28 | ) | | | .48 | |
Less distributions from: |
Net investment income | | | (.34 | ) | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (.34 | ) | | | — | | | | — | | | | — | | | | — | |
Net asset value, end of period | | $ | 46.39 | | | $ | 40.27 | | | $ | 38.77 | | | $ | 63.00 | | | $ | 101.28 | |
|
Total Return | | | 16.40 | % | | | 3.87 | % | | | (38.46 | %) | | | (37.80 | %) | | | 0.48 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 649 | | | $ | 1,756 | | | $ | 743 | | | $ | 890 | | | $ | 26,336 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.19 | % | | | 0.42 | % | | | (0.68 | %) | | | (1.46 | %) | | | (1.65 | %) |
Total expenses | | | 1.87 | % | | | 1.87 | % | | | 1.77 | % | | | 1.76 | % | | | 1.74 | % |
Portfolio turnover rate | | | — | | | | — | | | | — | | | | — | | | | — | |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Reverse share split — Per share amounts for the years presented through March 31, 2017 have been restated to reflect a 1:6 reverse share split effective October 31, 2016. |
d | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the period because of the sales and repurchases of Fund shares in relation to fluctuating market value of the investments of the fund. |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2020 |
EMERGING MARKETS BOND STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of the emerging markets bond market as defined by the Adviser.
The Emerging Markets Bond Fund H-Class returned -7.45% for the one-year period ended March 31, 2020. By comparison, the ICE Bank of America Merrill Lynch U.S. Dollar Emerging Markets Sovereign Plus Index returned -7.62% over the same period.
For most of 2019 and the beginning of 2020, emerging market countries experienced decreasing credit spreads, leading to positive performance for the Fund. Starting in early 2020, the coronavirus global pandemic caused countries around the world to shut down economies and issue stay-at-home orders, which disrupted global consumption and global production and increased credit spreads. In addition, increased political instability led to the expansion of credit spreads for some emerging market countries such as Argentina and Lebanon.
Most emerging market countries experienced an increase in credit spreads, with Argentina, South Africa, and Turkey experiencing some of the largest increases in credit spreads. During this period, United Arab Emirates (Abu Dhabi), Panama, and Ukraine were added to the Emerging Market credit default swap. Lebanon was both added and subsequently removed from the credit default swap.
Derivatives in the Fund were used to help provide efficient exposure to the emerging markets bond market and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s negative performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: |
A-Class | October 8, 2013 |
C-Class | October 8, 2013 |
H-Class | October 8, 2013 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| | THE RYDEX FUNDS ANNUAL REPORT | 47 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2020 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2020
| 1 Year | 5 Year | Since
Inception
(10/08/13) |
A-Class Shares | (7.41%) | 1.22% | 0.20% |
A-Class Shares with sales charge‡ | (11.81%) | 0.23% | (0.55%) |
C-Class Shares | (8.13%) | 0.39% | (0.63%) |
C-Class Shares with CDSC§ | (8.97%) | 0.39% | (0.63%) |
H-Class Shares | (7.45%) | 1.20% | 0.13% |
ICE BofA Merrill Lynch U.S. Dollar Emerging Markets Sovereign Plus Index | (7.62%) | 2.18% | 3.17% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The ICE BofA Merrill Lynch U.S. Dollar Emerging Markets Sovereign Plus Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Lass shares only; performance for C-Class shares will vary due to differences in fee structure. |
‡ | Fund returns are calculated using the maximum sales charge of 4.75%. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
48 | THE RYDEX FUNDS ANNUAL REPORT | |
SCHEDULE OF INVESTMENTS | March 31, 2020 |
EMERGING MARKETS BOND STRATEGY FUND | |
| | Face
Amount | | | Value | |
U.S. TREASURY BILLS†† - 1.0% |
U.S. Treasury Bills |
0.50% due 04/30/201,2 | | $ | 15,000 | | | $ | 14,999 | |
Total U.S. Treasury Bills | | | | |
(Cost $14,994) | | | | | | | 14,999 | |
| | | | | | | | | |
REPURCHASE AGREEMENTS††,3 - 50.5% |
J.P. Morgan Securities LLC
issued 03/31/20 at 0.01%
due 04/01/204 | | | 537,646 | | | | 537,646 | |
BofA Securities, Inc.
issued 03/31/20 at 0.00%
due 04/01/204 | | | 206,787 | | | | 206,787 | |
Total Repurchase Agreements | | | | |
(Cost $744,433) | | | | | | | 744,433 | |
| | | | | | | | | |
Total Investments - 51.5% | | | | |
(Cost $759,427) | | $ | 759,432 | |
Other Assets & Liabilities, net - 48.5% | | | 714,250 | |
Total Net Assets - 100.0% | | $ | 1,473,682 | |
Futures Contracts |
Description | | Number of
Contracts | | | Expiration
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation** | |
Interest Rate Futures Contracts Purchased† |
U.S. Treasury 5 Year Note Futures Contracts | | | 3 | | | | Jun 2020 | | | $ | 376,265 | | | $ | 5,715 | |
U.S. Treasury 10 Year Note Futures Contracts | | | 2 | | | | Jun 2020 | | | | 277,719 | | | | 1,543 | |
| | | | | | | | | | | $ | 653,984 | | | $ | 7,258 | |
Centrally Cleared Credit Default Swap Agreements Protection Sold†† |
Counterparty | Exchange | Index | | Protection
Premium
Rate | | | Payment
Frequency | | | Maturity
Date | | | Notional
Amount | | | Value | | | Upfront
Premiums
Received | | | Unrealized
Depreciation** | |
Barclays Bank plc | ICE | CDX.EM.33 Index | | | 1.00 | % | | | Quarterly | | | | 06/20/25 | | | $ | 1,200,000 | | | $ | (140,400 | ) | | $ | (123,112 | ) | | $ | (17,288 | ) |
Total Return Swap Agreements |
Counterparty | Index | Financing
Rate Pay | Payment
Frequency | | Maturity
Date | | | Units | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation) | |
OTC Credit Index Swap Agreements†† |
Goldman Sachs International | Invesco Emerging Markets Sovereign Debt ETF Swap | 1.23% (1 Week USD LIBOR + 0.55%) | At Maturity | | | 04/29/20 | | | | 13,262 | | | $ | 317,094 | | | $ | 2,780 | |
Goldman Sachs International | iShares J.P. Morgan USD Emerging Markets Bond ETF Swap | 1.13% (1 Week USD LIBOR + 0.45%) | At Maturity | | | 04/29/20 | | | | 3,948 | | | | 381,693 | | | | (3,896 | ) |
| | | | | | | | | | | | | | $ | 698,787 | | | $ | (1,116 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (concluded) | March 31, 2020 |
EMERGING MARKETS BOND STRATEGY FUND | |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is pledged as futures collateral at March 31, 2020. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as credit index swap collateral at March 31, 2020. |
| | CDX.EM.33 — Credit Default Swap Emerging Markets Series 33 Index |
| | ICE — Intercontinental Exchange |
| | LIBOR — London Interbank Offered Rate |
| | plc — Public Limited Company |
| | |
| | See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
U.S. Treasury Bills | | $ | — | | | $ | 14,999 | | | $ | — | | | $ | 14,999 | |
Repurchase Agreements | | | — | | | | 744,433 | | | | — | | | | 744,433 | |
Interest Rate Futures Contracts** | | | 7,258 | | | | — | | | | — | | | | 7,258 | |
Credit Index Swap Agreements** | | | — | | | | 2,780 | | | | — | | | | 2,780 | |
Total Assets | | $ | 7,258 | | | $ | 762,212 | | | $ | — | | | $ | 769,470 | |
Investments in Securities (Liabilities) | | Level 1
Quoted
Prices | | | Level 2
Significant
Observable
Inputs | | | Level 3
Significant
Unobservable
Inputs | | | Total | |
Credit Default Swap Agreements** | | $ | — | | | $ | 17,288 | | | $ | — | | | $ | 17,288 | |
Credit Index Swap Agreements** | | | — | | | | 3,896 | | | | — | | | | 3,896 | |
Total Liabilities | | $ | — | | | $ | 21,184 | | | $ | — | | | $ | 21,184 | |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EMERGING MARKETS BOND STRATEGY FUND | |
STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2020 |
Assets: |
Investments, at value (cost $14,994) | | $ | 14,999 | |
Repurchase agreements, at value (cost $744,433) | | | 744,433 | |
Cash | | | 517,509 | |
Segregated cash with broker | | | 336,140 | |
Unrealized appreciation on OTC swap agreements | | | 2,780 | |
Receivables: |
Variation margin on credit default swap agreements | | | 1,514 | |
Protection fees on credit default swaps | | | 433 | |
Variation margin on futures contracts | | | 121 | |
Total assets | | | 1,617,929 | |
| | | | | |
Liabilities: |
Unamortized upfront premiums received on credit default swap agreements | | | 123,112 | |
Unrealized depreciation on OTC swap agreements | | | 3,896 | |
Payable for: |
Swap settlement | | | 11,785 | |
Management fees | | | 1,145 | |
Transfer agent and administrative fees | | | 555 | |
Distribution and service fees | | | 421 | |
Portfolio accounting fees | | | 229 | |
Trustees’ fees* | | | 46 | |
Fund shares redeemed | | | 15 | |
Miscellaneous | | | 3,043 | |
Total liabilities | | | 144,247 | |
Commitments and contingent liabilities (Note 11) | | | — | |
Net assets | | $ | 1,473,682 | |
| | | | | |
Net assets consist of: |
Paid in capital | | $ | 1,850,752 | |
Total distributable earnings (loss) | | | (377,070 | ) |
Net assets | | $ | 1,473,682 | |
| | | | | |
A-Class: |
Net assets | | $ | 1,104,730 | |
Capital shares outstanding | | | 17,281 | |
Net asset value per share | | $ | 63.93 | |
Maximum offering price per share (Net asset value divided by 95.25%) | | $ | 67.12 | |
| | | | | |
C-Class: |
Net assets | | $ | 62,235 | |
Capital shares outstanding | | | 1,040 | |
Net asset value per share | | $ | 59.82 | |
| | | | | |
H-Class: |
Net assets | | $ | 306,717 | |
Capital shares outstanding | | | 4,830 | |
Net asset value per share | | $ | 63.50 | |
STATEMENT OF OPERATIONS |
Year Ended March 31, 2020 |
Investment Income: |
Interest | | $ | 133,548 | |
Total investment income | | | 133,548 | |
| |
Expenses: |
Management fees | | | 53,729 | |
Distribution and service fees: |
A-Class | | | 526 | |
C-Class | | | 1,002 | |
H-Class | | | 17,138 | |
Transfer agent and administrative fees | | | 18,085 | |
Portfolio accounting fees | | | 10,748 | |
Registration fees | | | 6,948 | |
Professional fees | | | 4,897 | |
Trustees’ fees* | | | 2,039 | |
Custodian fees | | | 1,043 | |
Miscellaneous | | | 4,470 | |
Total expenses | | | 120,625 | |
Net investment income | | | 12,923 | |
| | | | | |
Net Realized and Unrealized Gain (Loss): |
Net realized gain (loss) on: |
Investments | | | (182 | ) |
Swap agreements | | | (325,637 | ) |
Futures contracts | | | 291,685 | |
Net realized loss | | | (34,134 | ) |
Net change in unrealized appreciation (depreciation) on: |
Investments | | | 5 | |
Swap agreements | | | 22,950 | |
Futures contracts | | | (70,901 | ) |
Net change in unrealized appreciation (depreciation) | | | (47,946 | ) |
Net realized and unrealized loss | | | (82,080 | ) |
Net decrease in net assets resulting from operations | | $ | (69,157 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
EMERGING MARKETS BOND STRATEGY FUND | |
STATEMENTS OF CHANGES IN NET ASSETS |
| | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 12,923 | | | $ | 6,411 | |
Net realized gain (loss) on investments | | | (34,134 | ) | | | 278,777 | |
Net change in unrealized appreciation (depreciation) on investments | | | (47,946 | ) | | | 28,326 | |
Net increase (decrease) in net assets resulting from operations | | | (69,157 | ) | | | 313,514 | |
| | | | | | | | | |
Distributions to shareholders: | | | | | | | | |
A-Class | | | (2,501 | ) | | | — | |
C-Class | | | (5,902 | ) | | | — | |
H-Class | | | (332,227 | ) | | | — | |
Total distributions to shareholders | | | (340,630 | ) | | | — | |
| | | | | | | | | |
Capital share transactions: | | | | | | | | |
Proceeds from sale of shares | | | | | | | | |
A-Class | | | 1,927,596 | | | | 802,223 | |
C-Class | | | 145,366 | | | | 562,652 | |
H-Class | | | 5,754,621 | | | | 12,481,943 | |
Distributions reinvested | | | | | | | | |
A-Class | | | 2,501 | | | | — | |
C-Class | | | 5,902 | | | | — | |
H-Class | | | 332,224 | | | | — | |
Cost of shares redeemed | | | | | | | | |
A-Class | | | (1,529,027 | ) | | | (161,079 | ) |
C-Class | | | (143,144 | ) | | | (571,192 | ) |
H-Class | | | (14,659,065 | ) | | | (4,195,724 | ) |
Net increase (decrease) from capital share transactions | | | (8,163,026 | ) | | | 8,918,823 | |
Net increase (decrease) in net assets | | | (8,572,813 | ) | | | 9,232,337 | |
| | | | | | | | | |
Net assets: | | | | �� | | | | |
Beginning of year | | | 10,046,495 | | | | 814,158 | |
End of year | | $ | 1,473,682 | | | $ | 10,046,495 | |
| | | | | | | | | |
Capital share activity: | | | | | | | | |
Shares sold | | | | | | | | |
A-Class | | | 27,204 | | | | 10,840 | |
C-Class | | | 2,040 | | | | 8,050 | |
H-Class | | | 76,190 | | | | 173,562 | |
Shares issued from reinvestment of distributions | | | | | | | | |
A-Class | | | 35 | | | | — | |
C-Class | | | 87 | | | | — | |
H-Class | | | 4,616 | | | | — | |
Shares redeemed | | | | | | | | |
A-Class | | | (20,116 | ) | | | (2,266 | ) |
C-Class | | | (1,923 | ) | | | (8,390 | ) |
H-Class | | | (199,774 | ) | | | (58,196 | ) |
Net increase (decrease) in shares | | | (111,641 | ) | | | 123,600 | |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EMERGING MARKETS BOND STRATEGY FUND | |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 74.95 | | | $ | 73.42 | | | $ | 71.93 | | | $ | 72.75 | | | $ | 81.52 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .03 | | | | .10 | | | | (.55 | ) | | | (.91 | ) | | | 1.12 | |
Net gain (loss) on investments (realized and unrealized) | | | (4.86 | ) | | | 1.43 | | | | 2.13 | | | | 3.87 | | | | 2.23 | |
Total from investment operations | | | (4.83 | ) | | | 1.53 | | | | 1.58 | | | | 2.96 | | | | 3.35 | |
Less distributions from: |
Net investment income | | | (2.36 | ) | | | — | | | | (.09 | ) | | | (3.70 | ) | | | (12.12 | ) |
Net realized gains | | | (3.83 | ) | | | — | | | | — | | | | (.08 | ) | | | — | |
Total distributions | | | (6.19 | ) | | | — | | | | (.09 | ) | | | (3.78 | ) | | | (12.12 | ) |
Net asset value, end of period | | $ | 63.93 | | | $ | 74.95 | | | $ | 73.42 | | | $ | 71.93 | | | $ | 72.75 | |
|
Total Returnb | | | (7.41 | %) | | | 2.08 | % | | | 2.18 | % | | | 4.62 | % | | | 5.13 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 1,105 | | | $ | 761 | | | $ | 116 | | | $ | 113 | | | $ | 259 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.03 | % | | | 0.14 | % | | | (0.74 | %) | | | (1.19 | %) | | | 1.59 | % |
Total expenses | | | 1.68 | % | | | 1.66 | % | | | 1.58 | % | | | 1.58 | % | | | 1.58 | % |
Portfolio turnover rate | | | — | | | | — | | | | — | | | | 733 | % | | | 21,555 | % |
C-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 71.05 | | | $ | 70.12 | | | $ | 69.22 | | | $ | 70.54 | | | $ | 80.35 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | (.46 | ) | | | (.54 | ) | | | (1.06 | ) | | | (1.10 | ) | | | (1.00 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (4.58 | ) | | | 1.47 | | | | 2.05 | | | | 3.56 | | | | 3.31 | |
Total from investment operations | | | (5.04 | ) | | | .93 | | | | .99 | | | | 2.46 | | | | 2.31 | |
Less distributions from: |
Net investment income | | | (2.36 | ) | | | — | | | | (.09 | ) | | | (3.70 | ) | | | (12.12 | ) |
Net realized gains | | | (3.83 | ) | | | — | | | | — | | | | (.08 | ) | | | — | |
Total distributions | | | (6.19 | ) | | | — | | | | (.09 | ) | | | (3.78 | ) | | | (12.12 | ) |
Net asset value, end of period | | $ | 59.82 | | | $ | 71.05 | | | $ | 70.12 | | | $ | 69.22 | | | $ | 70.54 | |
|
Total Returnb | | | (8.13 | %) | | | 1.33 | % | | | 1.41 | % | | | 4.09 | % | | | 3.73 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 62 | | | $ | 59 | | | $ | 82 | | | $ | 90 | | | $ | 129 | |
Ratios to average net assets: |
Net investment income (loss) | | | (0.61 | %) | | | (0.79 | %) | | | (1.49 | %) | | | (1.54 | %) | | | (1.33 | %) |
Total expenses | | | 2.42 | % | | | 2.37 | % | | | 2.34 | % | | | 2.33 | % | | | 2.32 | % |
Portfolio turnover rate | | | — | | | | — | | | | — | | | | 733 | % | | | 21,555 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
EMERGING MARKETS BOND STRATEGY FUND | |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
H-Class | | Year Ended
March 31,
2020 | | | Year Ended
March 31,
2019 | | | Year Ended
March 29,
2018 | | | Year Ended
March 31,
2017c | | | Year Ended
March 31,
2016c | |
Per Share Data |
Net asset value, beginning of period | | $ | 74.52 | | | $ | 72.98 | | | $ | 71.51 | | | $ | 72.19 | | | $ | 81.18 | |
Income (loss) from investment operations: |
Net investment income (loss)a | | | .15 | | | | .23 | | | | (.55 | ) | | | (.28 | ) | | | (.44 | ) |
Net gain (loss) on investments (realized and unrealized) | | | (4.98 | ) | | | 1.31 | | | | 2.11 | | | | 3.38 | | | | 3.57 | |
Total from investment operations | | | (4.83 | ) | | | 1.54 | | | | 1.56 | | | | 3.10 | | | | 3.13 | |
Less distributions from: |
Net investment income | | | (2.36 | ) | | | — | | | | (.09 | ) | | | (3.70 | ) | | | (12.12 | ) |
Net realized gains | | | (3.83 | ) | | | — | | | | — | | | | (.08 | ) | | | — | |
Total distributions | | | (6.19 | ) | | | — | | | | (.09 | ) | | | (3.78 | ) | | | (12.12 | ) |
Net asset value, end of period | | $ | 63.50 | | | $ | 74.52 | | | $ | 72.98 | | | $ | 71.51 | | | $ | 72.19 | |
|
Total Return | | | (7.45 | %) | | | 2.11 | % | | | 2.19 | % | | | 4.85 | % | | | 4.82 | % |
Ratios/Supplemental Data |
Net assets, end of period (in thousands) | | $ | 307 | | | $ | 9,226 | | | $ | 615 | | | $ | 472 | | | $ | 212 | |
Ratios to average net assets: |
Net investment income (loss) | | | 0.20 | % | | | 0.32 | % | | | (0.75 | %) | | | (0.38 | %) | | | (0.55 | %) |
Total expenses | | | 1.67 | % | | | 1.70 | % | | | 1.58 | % | | | 1.54 | % | | | 1.56 | % |
Portfolio turnover rate | | | — | | | | — | | | | — | | | | 733 | % | | | 21,555 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Reverse share split — Per share amounts for the periods presented through March 31, 2017 have been restated to reflect a 1:4 reverse share split effective November 7, 2016. |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of seven separate classes of shares: Investor Class shares, A-Class shares, C-Class shares, H-Class shares, P-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. C-Class shares of each Fund automatically convert to A-Class shares of the same Fund on or about the 10th day of the month following the 10-year anniversary of the purchase of the C-Class shares. This conversion will be executed without any sales charge, fee or other charge. After the conversion is completed, the shares will be subject to all features and expenses of A-Class shares. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares require a minimum initial investment of $2 million and a minimum account balance of $1 million. At March 31, 2020, the Trust consisted of fifty-two funds.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment
Company Type |
Long Short Equity Fund | Non-diversified |
Emerging Markets 2x Strategy Fund | Non-diversified |
Inverse Emerging Markets 2x Strategy Fund | Non-diversified |
Emerging Markets Bond Strategy Fund | Non-diversified |
At March 31, 2020, A-Class, C-Class, H-Class, P-Class and Institutional Class shares have been issued by the Funds.
The Emerging Markets 2x Strategy Fund, Inverse Emerging Markets 2x Strategy Fund, and Emerging Markets Bond Strategy Fund are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The NAV of each Class of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, attributable to the Class by the number of outstanding shares of the Class.
The Trust calculates a NAV twice each business day; at 10:45 a.m. and at the close of the New York Stock Exchange (“NYSE”), usually 4:00 p.m. for the Emerging Markets 2x Strategy Fund, Inverse Emerging Markets 2x Strategy Fund and Emerging Markets Bond Strategy Fund. All other Funds in this report will price at the afternoon NAV. The NAV is calculated using the current market value of each Fund’s total assets as of the respective time of calculation. These financial statements are based on the March 31, 2020, afternoon NAV.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures,
| | THE RYDEX FUNDS ANNUAL REPORT | 55 |
NOTES TO FINANCIAL STATEMENTS (continued) |
including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds and closed-end investment companies are valued at the last quoted sale price.
U.S. Government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The values of swap agreements entered into by a fund are accounted for using the unrealized appreciation or depreciation on the agreements that are determined by marking the agreements to the last quoted value of the index or other underlying position that the swaps pertain to at the close of the NYSE.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis.
In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
56 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
(d) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Upfront payments received or made by a Fund on credit default swap agreements and interest rate swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
(e) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain or loss and unrealized appreciation or depreciation on investments.
Reported net realized foreign gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized appreciation and depreciation arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(f) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of March 31, 2020, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(g) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(h) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares, unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(i) Class Allocations
Interest and dividend income, most expenses, all realized gains and losses, and all unrealized appreciation and depreciation are allocated to the classes based upon the value of the outstanding shares in each Class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain
| | THE RYDEX FUNDS ANNUAL REPORT | 57 |
NOTES TO FINANCIAL STATEMENTS (continued) |
expenses have been allocated to the individual Funds in the Trust based on the respective net assets of each Fund included in the Trust.
(j) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.08% at March 31, 2020.
(k) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Derivatives
As part of their investment strategy, the Funds utilize a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized in the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
58 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table represents the Funds’ use and volume of futures on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Long | | | Short | |
Emerging Markets 2x Strategy Fund | Index exposure, Leverage, Liquidity | | $ | 107,648 | | | $ | (30,038 | ) |
Inverse Emerging Markets 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | — | | | | 12,538 | |
Emerging Markets Bond Strategy Fund | Duration, Index exposure, Leverage, Liquidity | | | 3,454,984 | | | | — | |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing over-the-counter (“OTC”) swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Total return and custom basket swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as an index or custom basket of securities) for a fixed or variable interest rate. Total return and custom basket swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. When utilizing total return or custom basket swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in value.
The following table represents the Funds’ use and volume of total return and custom basket swaps on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Long | | | Short | |
Long Short Equity Fund | Index exposure, Liquidity | | $ | 9,021,426 | | | $ | 17,032,117 | |
Emerging Markets 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | 9,162,748 | | | | — | |
Inverse Emerging Markets 2x Strategy Fund | Index exposure, Leverage, Liquidity | | | — | | | | 1,341,953 | |
Emerging Markets Bond Strategy Fund | Duration, Index exposure, Leverage, Liquidity | | | 3,345,078 | | | | — | |
Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. A fund enters into credit default swaps as a “seller” or “buyer” of protection primarily to gain or reduce exposure to the investment grade and/or high yield bond market. A seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. The buyer in a credit default swap is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If a credit event occurs, as defined under the terms of the swap agreement, the seller will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The notional amount reflects the maximum potential amount the seller of credit protection could be required to pay to the buyer if a credit event occurs. The seller of protection receives periodic premium payments from the buyer and may also receive or pay an upfront premium adjustment to the stated periodic payments. In the event a credit default occurs on a credit default swap referencing an index, a factor adjustment will take place and the buyer of protection will receive a payment reflecting the par less the default recovery rate of the defaulted index component based on its weighting in the index. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the fund selling the credit protection. For a fund utilizing centrally cleared credit default swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. For OTC credit default swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which a fund is selling credit protection, the default of a third party issuer.
| | THE RYDEX FUNDS ANNUAL REPORT | 59 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The following table represents the Funds’ use and volume of credit default swaps on a monthly basis:
| | | | Average Notional Amount | |
Fund | Use | | Protection Sold | | | Protection Purchased | |
Emerging Markets Bond Strategy Fund | Duration, Index exposure, Leverage, Liquidity | | $ | 5,025,000 | | | $ | — | |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of March 31, 2020:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Interest Rate contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
| | Variation margin on futures contracts | Variation margin on futures contracts |
Credit contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
| | Variation margin on credit default swap agreements | Unamortized upfront premiums received on credit default swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at March 31, 2020:
Asset Derivative Investments Value |
Fund | | Futures
Equity
Risk* | | | Swaps
Equity
Risk | | | Futures
Interest Rate
Risk* | | | Swaps
Credit
Risk* | | | Total Value at
March 31,
2020 | |
Long Short Equity Fund | | $ | — | | | $ | 1,178,278 | | | $ | — | | | $ | — | | | $ | 1,178,278 | |
Emerging Markets 2x Strategy Fund | | | 107 | | | | — | | | | — | | | | — | | | | 107 | |
Inverse Emerging Markets 2x Strategy Fund | | | — | | | | 8,669 | | | | — | | | | — | | | | 8,669 | |
Emerging Markets Bond Strategy Fund | | | — | | | | — | | | | 7,258 | | | | 2,780 | | | | 10,038 | |
Liability Derivative Investments Value |
Fund | | Futures
Equity
Risk* | | | Swaps
Equity
Risk | | | Futures
Interest Rate
Risk* | | | Swaps
Credit
Risk* | | | Total Value at
March 31,
2020 | |
Long Short Equity Fund | | $ | — | | | $ | 1,541,258 | | | $ | — | | | $ | — | | | $ | 1,541,258 | |
Emerging Markets 2x Strategy Fund | | | — | | | | 102,445 | | | | — | | | | — | | | | 102,445 | |
Inverse Emerging Markets 2x Strategy Fund | | | — | | | | 6,913 | | | | — | | | | — | | | | 6,913 | |
Emerging Markets Bond Strategy Fund | | | | | | | | | | | — | | | | 21,184 | | | | 21,184 | |
* | Includes cumulative appreciation (depreciation) of futures contracts and centrally cleared swap agreements as reported on the Schedules of Investments. For exchange-traded and centrally cleared derivatives, variation margin is reported within the Statements of Assets and Liabilities. |
60 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended March 31, 2020:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Interest Rate contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
Equity/Credit contracts | Net realized gain (loss) on OTC swap agreements |
| Net change in unrealized appreciation (depreciation) on OTC swap agreements |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended March 31, 2020:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations |
Fund | | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Futures
Interest Rate
Risk | | | Swaps
Credit
Risk | | | Total | |
Long Short Equity Fund | | $ | — | | | $ | 129,462 | | | $ | — | | | $ | — | | | $ | 129,462 | |
Emerging Markets 2x Strategy Fund | | | (31,458 | ) | | | (3,483,044 | ) | | | — | | | | — | | | | (3,514,502 | ) |
Inverse Emerging Markets 2x Strategy Fund | | | 11,162 | | | | 163,330 | | | | — | | | | — | | | | 174,492 | |
Emerging Markets Bond Strategy Fund | | | — | | | | — | | | | 291,685 | | | | (325,637 | ) | | | (33,952 | ) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations |
Fund | | Futures
Equity
Risk | | | Swaps
Equity
Risk | | | Futures
Interest Rate
Risk | | | Swaps
Credit
Risk | | | Total | |
Long Short Equity Fund | | $ | — | | | $ | (295,398 | ) | | $ | — | | | $ | — | | | $ | (295,398 | ) |
Emerging Markets 2x Strategy Fund | | | (78 | ) | | | (285,063 | ) | | | — | | | | — | | | | (285,141 | ) |
Inverse Emerging Markets 2x Strategy Fund | | | — | | | | 42,848 | | | | — | | | | — | | | | 42,848 | |
Emerging Markets Bond Strategy Fund | | | — | | | | — | | | | (70,901 | ) | | | 22,950 | | | | (47,951 | ) |
In conjunction with the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Foreign Investments
There are several risks associated with exposure to foreign currencies, foreign issuers and emerging markets. A fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and the imposition of currency controls or other political developments in the U.S. or abroad. In addition, the Fund may incur transaction costs in connection with conversions between various currencies. The Fund may, but is not obligated to, engage in currency hedging transactions, which generally involve buying currency forward, options or futures contracts. However, not all currency risks may be effectively hedged, and in some cases the costs of hedging techniques may outweigh expected benefits. In such instances, the value of securities denominated in foreign currencies can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar.
The Funds may invest in securities of foreign companies directly, or in financial instruments, such as ADRs and exchange-traded funds, which are indirectly linked to the performance of foreign issuers. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Investing in securities of foreign companies directly, or in financial instruments that are indirectly linked to the performance of foreign issuers, may involve risks
| | THE RYDEX FUNDS ANNUAL REPORT | 61 |
NOTES TO FINANCIAL STATEMENTS (continued) |
not typically associated with investing in U.S. issuers. The value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets may fluctuate more than those of securities traded on U.S. markets. Many foreign countries lack accounting and disclosure standards comparable to those that apply to U.S. companies, and it may be more difficult to obtain reliable information regarding a foreign issuer’s financial condition and operations. Transaction costs and costs associated with custody services are generally higher for foreign securities than they are for U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries portions of these taxes are recoverable, the non-recovered portion will reduce the income received by the Funds.
Emerging markets, which consist of countries that have an emerging stock market as defined by Standard & Poor’s®, countries or markets with low- to middle-income economies as classified by the World Bank, and other countries or markets with similar characteristics as determined by GI, can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Emerging markets can be subject to greater social, economic, regulatory, and political uncertainties and can be extremely volatile. As a result, the securities of emerging market issuers may present market, credit, currency, liquidity, legal, political and other risks different from, or greater than, the risks of investing in securities of developed foreign countries. In addition, the risks associated with investing in a narrowly defined geographic area are generally more pronounced with respect to investments in emerging market countries. The Fund may also be subject to this risk with respect to its investments in derivatives or other securities or financial instruments whose returns are related to the returns of emerging market securities.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
62 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
| | | | | | | | | | | | | | | | Gross Amounts Not Offset
in the Statements of
Assets and Liabilities | | | | | |
Fund | Instrument | | Gross
Amounts of
Recognized
Assets1 | | | Gross
Amounts
Offset in the
Statements
of Assets and
Liabilities | | | Net Amount
of Assets
Presented on
the Statements
of Assets and
Liabilities | | | Financial
Instruments | | | Cash
Collateral
Received | | | Net
Amount | |
Long Short Equity Fund | Custom basket swap agreements | | $ | 1,178,278 | | | $ | — | | | $ | 1,178,278 | | | $ | (1,178,278 | ) | | $ | — | | | $ | — | |
Inverse Emerging Markets 2x Strategy Fund | Swap equity contracts | | | 8,669 | | | | — | | | | 8,669 | | | | — | | | | — | | | | 8,669 | |
Emerging Markets Bond Strategy Fund | Swap equity contracts | | | 2,780 | | | | — | | | | 2,780 | | | | (2,780 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | Gross Amounts Not Offset
in the Statements of
Assets and Liabilities | | | | | |
Fund | Instrument | | Gross
Amounts of
Recognized
Liabilities1 | | | Gross
Amounts
Offset in the
Statements
of Assets and
Liabilities | | | Net Amount
of Liabilities
Presented on
the Statements
of Assets and
Liabilities | | | Financial
Instruments | | | Cash
Collateral
Pledged | | | Net
Amount | |
Long Short Equity Fund | Custom basket swap agreements | | $ | 1,541,258 | | | $ | — | | | $ | 1,541,258 | | | $ | (1,541,258 | ) | | $ | — | | | $ | — | |
Emerging Markets 2x Strategy Fund | Swap equity contracts | | | 102,445 | | | | — | | | | 102,445 | | | | (102,445 | ) | | | — | | | | — | |
Inverse Emerging Markets 2x Strategy Fund | Swap equity contracts | | | 6,913 | | | | — | | | | 6,913 | | | | (6,913 | ) | | | — | | | | — | |
Emerging Markets Bond Strategy Fund | Swap equity contracts | | | 3,896 | | | | — | | | | 3,896 | | | | (3,896 | ) | | | — | | | | — | |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of March 31, 2020.
Fund | Counterparty | Asset Type | | Cash Pledged | | | Cash Received | |
Emerging Markets 2x Strategy Fund | Goldman Sachs International | Futures contracts | | $ | 7,020 | | | $ | — | |
Emerging Markets Bond Strategy Fund | Barclays Bank plc | Credit default swap agreements | | | 336,140 | | | | — | |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
| | THE RYDEX FUNDS ANNUAL REPORT | 63 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | | Management Fees
(as a % of Net Assets) | |
Long Short Equity Fund | | | 0.90 | % |
Emerging Markets 2x Strategy Fund | | | 0.90 | % |
Inverse Emerging Markets 2x Strategy Fund | | | 0.90 | % |
Emerging Markets Bond Strategy Fund | | | 0.75 | % |
When the aggregate assets of each series of the Trust (excluding the Long Short Equity Fund, Managed Futures Strategy Fund and Multi-Hedge Strategies Fund) and each series of Rydex Dynamic Funds equal or exceed $10 billion, the advisory fee rate paid by each individual Fund will be reduced in accordance with the asset level and breakpoint schedule set forth below.
Fund Assets Under Management | | Fund Asset-Based
Breakpoint Reductions | |
$500 million - $1 billion | | | 0.025 | % |
> $1 billion - $2 billion | | | 0.050 | % |
> $2 billion | | | 0.075 | % |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted a Distribution Plan applicable to A-Class shares, H-Class shares and P-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Funds will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services.
The Board has adopted a separate Distribution and Shareholder Services Plan applicable to its C-Class shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates a shareholder’s financial adviser for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial adviser an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial adviser. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2020, GFD retained sales charges of $122,345 relating to sales of A-Class shares of the Trust.
64 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At March 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and
Terms of Agreement | | Face Value | | | Repurchase Price | | | Collateral | | Par Value | | | Fair Value | |
J.P. Morgan Securities LLC | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.01% | | | | | | | | | | 2.00% | | | | | | | | |
Due 04/01/20 | | $ | 129,371,353 | | | $ | 129,371,389 | | | 11/30/22 | | $ | 125,405,900 | | | $ | 131,958,818 | |
| | | | | | | | | | | | | | | | | | | |
BofA Securities, Inc. | | | | | | | | | | U.S. Treasury Note | | | | | | | | |
0.00% | | | | | | | | | | 2.13% | | | | | | | | |
Due 04/01/20 | | | 49,758,213 | | | | 49,758,213 | | | 08/15/21 | | | 49,322,100 | | | | 50,753,381 | |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
At March 31, 2020, the Funds did not participate in securities lending transactions.
| | THE RYDEX FUNDS ANNUAL REPORT | 65 |
NOTES TO FINANCIAL STATEMENTS (continued) |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended March 31, 2020 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
Long Short Equity Fund | | $ | 153,645 | | | $ | — | | | $ | 153,645 | |
Emerging Markets 2x Strategy Fund | | | 44,598 | | | | — | | | | 44,598 | |
Inverse Emerging Markets 2x Strategy Fund | | | 4,522 | | | | — | | | | 4,522 | |
Emerging Markets Bond Strategy Fund | | | 340,630 | | | | — | | | | 340,630 | |
The tax character of distributions paid during the year ended March 31, 2019 was as follows:
Fund | | Ordinary
Income | | | Long-Term
Capital Gain | | | Total
Distributions | |
Long Short Equity Fund | | $ | 269,698 | | | $ | 168,798 | | | $ | 438,496 | |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of March 31, 2020 were as follows:
Fund | | Undistributed
Ordinary
Income | | | Undistributed
Long-Term
Capital Gain | | | Net Unrealized
Appreciation/
(Depreciation) | | | Accumulated
Capital and
Other Losses | | | Total | |
Long Short Equity Fund | | $ | — | | | $ | — | | | $ | (1,473,431 | ) | | $ | (4,487,932 | ) | | $ | (5,961,363 | ) |
Emerging Markets 2x Strategy Fund | | | — | | | | — | | | | (110,252 | ) | | | (14,823,214 | ) | | | (14,933,466 | ) |
Inverse Emerging Markets 2x Strategy Fund | | | — | | | | — | | | | 1,756 | | | | (18,353,342 | ) | | | (18,351,586 | ) |
Emerging Markets Bond Strategy Fund | | | — | | | | — | | | | (18,399 | ) | | | (358,671 | ) | | | (377,070 | ) |
66 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. Under the RIC Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. As of March 31, 2020, capital loss carryforwards for the Funds were as follows:
| | | Unlimited | | | Total | |
Fund | | Short-Term | | | Long-Term | | | Capital Loss
Carryforward | |
Long Short Equity Fund | | $ | (3,969,543 | ) | | $ | (518,389 | ) | | $ | (4,487,932 | ) |
Emerging Markets 2x Strategy Fund | | | (13,627,027 | ) | | | (1,193,784 | ) | | | (14,820,811 | ) |
Inverse Emerging Markets 2x Strategy Fund | | | (17,482,572 | ) | | | (869,455 | ) | | | (18,352,027 | ) |
For the year ended March 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | | Utilized | |
Inverse Emerging Markets 2x Strategy Fund | | $ | 174,492 | |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in swaps, losses deferred due to wash sales, distributions in connection with redemption of fund shares, taxable overdistributions, and the “mark-to-market” of certain derivatives. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of March 31, 2020 for permanent book/tax differences:
Fund | | Paid In
Capital | | | Total
Distributable
Earnings/(Loss) | |
Long Short Equity Fund | | $ | (40,423 | ) | | $ | 40,423 | |
Inverse Emerging Markets 2x Strategy Fund | | | (99 | ) | | | 99 | |
Emerging Markets Bond Strategy Fund | | | 176,707 | | | | (176,707 | ) |
At March 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | | Tax
Cost | | | Tax
Unrealized
Appreciation | | | Tax
Unrealized
Depreciation | | | Net Unrealized
Appreciation/
(Depreciation) | |
Long Short Equity Fund | | $ | 16,193,638 | | | $ | 2,196,668 | | | $ | (3,670,099 | ) | | $ | (1,473,431 | ) |
Emerging Markets 2x Strategy Fund | | | 1,711,229 | | | | 69,579 | | | | (179,831 | ) | | | (110,252 | ) |
Inverse Emerging Markets 2x Strategy Fund | | | 671,223 | | | | 8,669 | | | | (6,913 | ) | | | 1,756 | |
Emerging Markets Bond Strategy Fund | | | 759,427 | | | | 14,942 | | | | (33,341 | ) | | | (18,399 | ) |
| | THE RYDEX FUNDS ANNUAL REPORT | 67 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Pursuant to U.S. federal income tax regulations applicable to regulated investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2020, the following losses reflected in the accompanying financial statements were deferred for U.S. federal income tax purposes until April 1, 2020:
Fund | | Ordinary | | | Capital | |
Emerging Markets 2x Strategy Fund | | $ | (2,403 | ) | | $ | — | |
Inverse Emerging Markets 2x Strategy Fund | | | (1,315 | ) | | | — | |
Emerging Markets Bond Strategy Fund | | | — | | | | (358,671 | ) |
Note 9 – Securities Transactions
For the year ended March 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | | Purchases | | | Sales | |
Long Short Equity Fund | | $ | 23,180,762 | | | $ | 31,547,782 | |
Emerging Markets 2x Strategy Fund | | | 52,217,164 | | | | 57,894,959 | |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended March 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | | Purchases | | | Sales | | | Realized
Gain | |
Emerging Markets 2x Strategy Fund | | $ | 53,326 | | | $ | 483,455 | | | $ | 2,425 | |
Note 10 – Line of Credit
The Trust (for all funds with the exception of the Long Short Equity Fund), along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 3.02% for the year ended March 31, 2020. The Funds did not have any borrowings outstanding under this agreement at March 31, 2020.
The average daily balances borrowed for the year ended March 31, 2020, were as follows:
| Fund | | Average Daily Balance | |
| Emerging Markets 2x Strategy Fund | | $ | 1,708 | |
Note 11– Legal Proceedings
Tribune Company
Rydex Series Funds has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Series Funds of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which
68 | THE RYDEX FUNDS ANNUAL REPORT | |
NOTES TO FINANCIAL STATEMENTS (continued) |
Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Series Funds, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments.
On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The plaintiff requested that the Court direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
| | THE RYDEX FUNDS ANNUAL REPORT | 69 |
NOTES TO FINANCIAL STATEMENTS (concluded) |
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 12 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 13 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Funds’ financial statements.
70 | THE RYDEX FUNDS ANNUAL REPORT | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Guggenheim Long Short Equity Fund, Rydex Emerging Markets 2x Strategy Fund, Rydex Inverse Emerging Markets 2x Strategy Fund and Rydex Emerging Markets Bond Strategy Fund and the Board of Trustees of Rydex Series Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Guggenheim Long Short Equity Fund, Rydex Emerging Markets 2x Strategy Fund, Rydex Inverse Emerging Markets 2x Strategy Fund and Rydex Emerging Markets Bond Strategy Fund (collectively referred to as the “Funds”), (four of the funds constituting Rydex Series Funds (the “Trust”)), including the schedules of investments, as of March 31, 2020, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (four of the funds constituting Rydex Series Funds) at March 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2020, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
May 28, 2020
| | THE RYDEX FUNDS ANNUAL REPORT | 71 |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2020, the following funds had the corresponding percentages qualify for the reduced tax rate pursuant to the Jobs and Growth Tax Relief and Reconciliation Act of 2003 or for the dividends received deduction for corporations. See the qualified dividend income and dividend received deduction columns, respectively, in the table below.
Additionally, of the taxable ordinary income distributions paid during the fiscal year ended March 31, 2020, the following funds had the corresponding percentages qualify as qualified short-term capital gains as permitted by IRC Section 871(k)(2). See qualified short-term capital gain column in the table below.
Fund | | Qualified
Dividend
Income | | | Dividend
Received
Deduction | | | Qualified
Short-Term
Capital Gain | |
Long Short Equity Fund | | | 100.00 | % | | | 100.00 | % | | | 0.00 | % |
Emerging Markets 2x Strategy Fund | | | 100.00 | % | | | 0.00 | % | | | 0.00 | % |
Emerging Markets Bond Strategy Fund | | | 0.00 | % | | | 0.00 | % | | | 100.00 | % |
With respect to the taxable year ended March 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | | From long-term
capital gain: | | | From long-term capital
gain, using proceeds
from shareholder
redemptions: | |
Emerging Markets Bond Strategy Fund | | $ | — | | | $ | 78,498 | |
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
72 | THE RYDEX FUNDS ANNUAL REPORT | |
OTHER INFORMATION (Unaudited)(concluded) |
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
| | THE RYDEX FUNDS ANNUAL REPORT | 73 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES | | | |
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present). Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present). Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present). Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present). Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 | Current: Retired Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present). Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chair of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chair of the Contracts Review Committee | Since 2005 (Trustee) Since 2019
(Vice Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present). Former: Harvest Volatility Edge Trust (3) (2017-2019). |
74 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INDEPENDENT TRUSTEES - concluded | | |
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present). Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018-present); Edward-Elmhurst Healthcare System (2012-present). Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019
(Chair of the Audit Committee) | Current: Retired. Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present). Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
| | THE RYDEX FUNDS ANNUAL REPORT | 75 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years | Number of
Portfolios
in Fund
Complex
Overseen | Other
Directorships Held
by Trustees*** |
INTERESTED TRUSTEE | | | | |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019
(Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present). Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | Each Trustee also serves on the boards of trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Managed Duration Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Funds and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the board of trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
76 | THE RYDEX FUNDS ANNUAL REPORT | |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS | | | |
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present). Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present). Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present). Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present). Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
| | THE RYDEX FUNDS ANNUAL REPORT | 77 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address*
and Year of Birth | Position(s)
Held with
Trust | Term of Office
and Length of
Time Served** | Principal Occupation(s)
During Past Five Years |
OFFICERS - concluded | |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present). Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present). Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
78 | THE RYDEX FUNDS ANNUAL REPORT | |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
| | ● | We use your information in connection with servicing your accounts. |
| | ● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
| | ● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
| | ● | We use information for security purposes. We may use your information to protect our company and our customers. |
| | ● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
| | THE RYDEX FUNDS ANNUAL REPORT | 79 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
| | ● | We use information as otherwise permitted by law, as we may notify you. |
| | ● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
80 | THE RYDEX FUNDS ANNUAL REPORT | |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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Item 2. Code of Ethics.
The registrant’s Board of Trustees has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that it has at least one audit committee financial expert serving on its audit committee (the “Audit Committee”), Sandra G. Sponem. Ms. Sponem is “independent,” meaning that she is not an “interested person” of the Registrant (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) and she does not accept any consulting, advisory, or other compensatory fee from the Registrant (except in her capacity as a Board or committee member).
Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)Audit Fees. The aggregate Audit Fees billed by the registrant’s principal accountant for professional services rendered for the audit of the annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended March 31, 2020 and March 31, 2019 were $852,722 and $867,833, respectively.
(b)Audit Related Fees. The aggregate Audit-Related Fees billed by the registrant’s principal accountant for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item for the fiscal years ended March 31, 2020 and March 31, 2019 were $0 and $0, respectively.
(c)Tax Fees: The aggregate Tax Fees billed by the registrant’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended March 31, 2020 and March 31, 2019 were $456,085 and $455,018, respectively. These services consisted of (i) preparation of U.S. federal, state and excise tax returns; (ii) U.S. federal and state tax planning, advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired and (iv) review of U.S. federal excise distribution calculations.
(d)All Other Fees. The aggregate All Other Fees billed by the registrant’s principal accountant for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item, for the fiscal years ended March 31, 2020 and March 31, 2019 were $0 and $0, respectively.
(e)Audit Committee Pre-Approval Policies and Procedures.
(1) The registrant’s audit committee reviews, and in its sole discretion, pre-approves, pursuant to written pre-approval procedures (A) all engagements for audit and non-audit services to be provided by the principal accountant to the registrant and (B) all engagements for non-audit services to be provided by the principal accountant (1) to the registrant’s investment adviser (not including a sub-adviser whose role is primarily portfolio management and is subcontracted or overseen by another investment adviser) and (2) to any entity controlling, controlled by or under common control with the registrant’s investment adviser that provides ongoing services to the registrant; but in the case of the services described in subsection (B)(1) or (2), only if the engagement relates directly to the operations and financial reporting of the registrant; provided that such pre-approval need not be obtained in circumstances in which the preapproval requirement is waived under rules promulgated by the Securities and Exchange Commission or New York Stock Exchange listing standards. Sections V.B.2 and V.B.3 of the registrant’s audit committee’s Audit Committee Charter contain the Audit Committee’s Pre-Approval Policies and Procedures and such sections are included below.
V.B.2.Pre-approve any engagement of the independent auditors to provide any non-prohibited services to the Fund, including the fees and other compensation to be paid to the independent auditors (unless an exception is available under Rule 2-01 of Regulation S-X).
(a) The categories of services to be reviewed and considered for pre-approval include the following (collectively, “Identified Services”):
Audit Services
• Annual financial statement audits
• Seed audits (related to new product filings, as required)
• SEC and regulatory filings and consents
Audit-Related Services
• Accounting consultations
• Fund merger/reorganization support services
• Other accounting related matters
• Agreed upon procedures reports
• Attestation reports
• Other internal control reports
Tax Services
• Recurring tax services:
o Preparation of Federal and state income tax returns, including extensions
o Preparation of calculations of taxable income, including fiscal year tax designations
o Preparation of annual Federal excise tax returns (if applicable)
o Preparation of calendar year excise distribution calculations
o Calculation of tax equalization on an as-needed basis
o Preparation of the estimated excise distribution calculations on an as-needed basis
o Preparation of quarterly Federal, state and local and franchise tax estimated tax payments on an as-needed basis
o Preparation of state apportionment calculations to properly allocate Fund taxable income among the states for state tax filing
purposes
o Provision of tax compliance services in India for Funds with direct investments in India
o Assistance with management’s identification of passive foreign investment companies (PFICs) for tax purposes
• Permissible non-recurring tax services upon request:
o Assistance with determining ownership changes which impact a Fund’s utilization of loss carryforwards
o Assistance with calendar year shareholder reporting designations on Form 1099
o Assistance with corporate actions and tax treatment of complex securities and structured products
o Assistance with IRS ruling requests and calculation of deficiency dividends
o Conduct training sessions for the Adviser’s internal tax resources
o Assistance with Federal, state, local and international tax planning and advice regarding the tax consequences of proposed or actual transactions
o Tax services related to amendments to Federal, state and local returns and sales and use tax compliance
o RIC qualification reviews
o Tax distribution analysis and planning
o Tax authority examination services
o Tax appeals support services
o Tax accounting methods studies
o Fund merger, reorganization and liquidation support services
o Tax compliance, planning and advice services and related projects
(b) The Committee has pre-approved Identified Services for which the estimated fees are less than $25,000.
(c) For Identified Services with estimated fees of $25,000 or more, but less than $50,000, the Chair or any member of the Committee designated by the Chair is hereby authorized to pre-approve such services on behalf of the Committee.
(d) For Identified Services with estimated fees of $50,000 or more, such services require pre-approval by the Committee.
(e) All requests for Identified Services to be provided by the independent auditor that were pre-approved by the Committee shall be submitted to the Chief Accounting Officer (“CAO”) of the Trust by the independent auditor using the pre-approval request form attached as Appendix C to the Audit Committee Charter. The Trust’s CAO will determine whether such services are included within the list of services that have received the general preapproval of the Committee.
(f) The independent auditors or the CAO of the Trust (or an officer of the Trust who reports to the CAO) shall report to the Committee at each of its regular quarterly meetings all audit, audit-related and permissible non-audit services initiated since the last such report (unless the services were contained in the initial audit plan, as previously presented to, and approved by, the Committee). The report shall include a general description of the services and projected fees, and the means by which such services were approved by the Committee (including the particular category of Identified Services under which pre-approval was obtained).
V.B.3. Pre-approve any engagement of the independent auditors, including the fees and other compensation to be paid to the independent auditors, to provide any non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust), if the engagement relates directly to the operations and financial reporting of the Trust (unless an exception is available under Rule 2-01 of Regulation S-X).
(a) The Chair or any member of the Committee designated by the Chair may grant the pre-approval for non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations and financial reporting of the Trust for which the estimated fees are less than $25,000. All such delegated pre-approvals shall be presented to the Committee no later than the next Committee meeting.
(b) For non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations and financial reporting of the Trust for which the estimated fees are $25,000 or more, such services require pre-approval by the Committee.
(2) None of the services described in each of Items 4(b) through (d) were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)Non-Audit Fees. The aggregate non-audit fees billed by the registrant’s accountant for the most recent fiscal year and the preceding fiscal year for services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant were $456,085 and $455,018, respectively. These aggregate fees were less than the aggregate fees billed for the same periods by the registrant’s principal accountant for audit services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8.Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s President (principal executive officer) and Treasurer (principal financial officer) have evaluated the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) as of a date within 90 days of this filing and have concluded that based on such evaluation as required by Rule 30a-3(b) under the Investment Company Act, that the registrant’s disclosure controls and procedures were effective as of that date in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not Applicable.
Item 13. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.
(a)(2) Separate certifications by the President (principal executive officer) and Treasurer (principal financial officer) of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) are attached.
(b) A certification by the registrant’s President (principal executive officer) and Treasurer (principal financial officer) as required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)) is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Rydex Series Funds | |
| | | |
| By (Signature and Title)* | /s/ Brian E. Binder | |
| | Brian E. Binder, President and Chief Executive Officer | |
| | | |
| Date | June 9, 2020 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ Brian E. Binder | |
| | Brian E. Binder, President and Chief Executive Officer | |
| | | |
| Date | June 9, 2020 | |
| | | |
| By (Signature and Title)* | /s/ John L. Sullivan | |
| | John L. Sullivan, Chief Financial Officer, Chief Accounting Officer and Treasurer | |
| | | |
| Date | June 9, 2020 | |
| * | Print the name and title of each signing officer under his or her signature. |
